10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 000-50812

MULTI-FINELINE ELECTRONIX, INC.

(Exact name of registrant as specified in its charter)

Delaware	95-3947402
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3140 East Coronado Street

Anaheim, CA 92806

(Address of principal executive offices, Zip Code)

(714) 688-5201

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).    Yes  ¨    No  x

The number of outstanding shares of the registrant’s Common Stock, $0.0001 par value, as of July 31, 2011 was 24,096,571.

Multi-Fineline Electronix, Inc.

Index

PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Cash Flows	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	20
PART II. OTHER INFORMATION
Item 1A.	Risk Factors	20
Item 6.	Exhibits	29
	Signatures	32

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

MULTI-FINELINE ELECTRONIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Data)

	June 30, 2011		September 30, 2010
	(unaudited)
ASSETS
Cash and cash equivalents	$	100,008	$	99,875
Short-term investments		—		14,991
Accounts receivable, net of allowances of $4,028 and $2,354 at June 30, 2011 and September 30, 2010, respectively		135,458		149,469
Inventories		73,285		76,933
Deferred taxes		3,445		3,445
Income taxes receivable		4,548		4,548
Assets held for sale		2,689		2,958
Other current assets		1,991		2,761
Total current assets		321,424		354,980
Property, plant and equipment, net		212,322		185,282
Land use rights		6,595		3,461
Deferred taxes		5,708		5,505
Goodwill		7,537		7,537
Other assets		11,955		5,556
Total assets	$	565,541	$	562,321
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	116,842	$	156,910
Accrued liabilities		23,981		27,077
Income taxes payable		1,302		4,972
Total current liabilities		142,125		188,959
Other liabilities		15,348		11,830
Total liabilities		157,473		200,789
Commitments and contingencies (Note 2)
Stockholders’ equity
Preferred stock, $0.0001 par value, 5,000,000 and 5,000,000 shares authorized at June 30, 2011 and September 30, 2010, respectively; 0 and 0 shares issued and outstanding at June 30, 2011 and September 30, 2010, respectively		—		—
Common stock, $0.0001 par value; 100,000,000 and 100,000,000 shares authorized at June 30, 2011 and September 30, 2010, respectively; 24,096,571 and 23,916,665 shares issued and outstanding at June 30, 2011 and September 30, 2010, respectively		2		2
Additional paid-in capital		87,165		85,150
Retained earnings		286,325		250,829
Accumulated other comprehensive income		34,576		25,551
Total stockholders’ equity		408,068		361,532
Total liabilities and stockholders’ equity	$	565,541	$	562,321

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

MULTI-FINELINE ELECTRONIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Share and Per Share Data)

(unaudited)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2011			2010			2011			2010
Net sales	$	191,838		$	181,049		$	640,062		$	564,623
Cost of sales		168,525			158,808			554,520			483,606
Gross profit		23,313			22,241			85,542			81,017
Operating expenses:
Research and development		2,378			4,442			7,960			10,738
Sales and marketing		5,512			5,088			19,259			17,627
General and administrative		3,800			4,834			13,468			15,610
Impairment and restructuring		999			3,328			999			5,265
Total operating expenses		12,689			17,692			41,686			49,240
Operating income		10,624			4,549			43,856			31,777
Other income (expense), net:
Interest income		213			168			651			370
Interest expense		(123	)		(121	)		(348	)		(667	)
Other income (expense), net		261			242			342			739
Income before income taxes		10,975			4,838			44,501			32,219
Provision for income taxes		(2,157	)		(2,456	)		(9,005	)		(8,582	)
Net income	$	8,818		$	2,382		$	35,496		$	23,637
Net income per share:
Basic	$	0.37		$	0.09		$	1.48		$	0.93
Diluted	$	0.36		$	0.09		$	1.46		$	0.92
Shares used in computing net income per share:
Basic		24,092,048			25,417,674			24,004,063			25,379,381
Diluted		24,331,731			25,762,862			24,325,067			25,794,568
Other comprehensive income, net of tax:
Net income	$	8,818		$	2,382		$	35,496		$	23,637
Foreign currency translation adjustment		3,573			1,174			9,025			1,256
Total comprehensive income	$	12,391		$	3,556		$	44,521		$	24,893

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

MULTI-FINELINE ELECTRONIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(unaudited)

	Nine Months Ended June 30,
	2011			2010
Cash flows from operating activities
Net income	$	35,496		$	23,637
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		33,717			34,259
Provision for doubtful accounts and returns		9,094			3,656
Deferred taxes		(202	)		141
Stock-based compensation expense		2,973			4,294
Asset impairments		999			3,475
Loss (gain) on disposal of equipment		233			(289	)
Changes in operating assets and liabilities:
Accounts receivable		4,985			11,544
Inventories		5,435			(3,411	)
Due to (from) affiliates, net		3,312			(326	)
Other current assets		860			(778	)
Other assets		(9,313	)		(1,364	)
Accounts payable		(45,364	)		(16,749	)
Accrued liabilities		(5,131	)		3,869
Income taxes payable		(3,472	)		1,185
Other current liabilities		—			292
Other liabilities		3,513			2,039
Net cash provided by operating activities		37,135			65,474
Cash flows from investing activities
Sales of investments		14,991			6,196
Purchases of investments		—			(4,996	)
Purchases of property and equipment		(53,546	)		(39,092	)
Proceeds from sale of equipment		601			1,453
Net cash used in investing activities		(37,954	)		(36,439	)
Cash flows from financing activities
Proceeds from exercise of stock options		1,266			1,969
Repayments of long-term debt		—			(11,144	)
Tax withholdings for net share settlement of equity awards		(1,315	)		(1,248	)
Repurchase of common stock		(924	)		(8,277	)
Net cash used in financing activities		(973	)		(18,700	)
Effect of exchange rate changes on cash		1,925			201
Net increase in cash		133			10,536
Cash and cash equivalents at the beginning of the period		99,875			139,721
Cash and cash equivalents at the end of the period	$	100,008		$	150,257
Non-cash investing activities
Purchases of property and equipment	$	18,084		$	13,786

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

1. Description of Business

Multi-Fineline Electronix, Inc. (“MFLEX” or the “Company”) was incorporated in 1984 in the State of California and reincorporated in the State of Delaware in June 2004. The Company is primarily engaged in the engineering, design and manufacture of flexible printed circuit boards along with related component assemblies.

Affiliates and subsidiaries of WBL Corporation Limited (collectively “WBL”), a Singapore company, beneficially owned approximately 61% and 62% of the Company’s outstanding common stock as of June 30, 2011 and September 30, 2010, respectively, which provides WBL with control over the outcome of stockholder votes, except with respect to certain related-party transactions.

2. Basis of Presentation

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company has two wholly owned subsidiaries located in China: MFLEX Suzhou Co., Ltd., (“MFC”) formerly known as Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. (“MFC2”) and into which Multi-Fineline Electronix (Suzhou) Co., Ltd (“MFC1”) was merged in fiscal 2010, and MFLEX Chengdu Co., Ltd. (“MFLEX Chengdu”); one located in the Cayman Islands: M-Flex Cayman Islands, Inc. (“MFCI”); one located in Singapore: Multi-Fineline Electronix Singapore Pte. Ltd. (“MFLEX Singapore”); one in Malaysia: Multi-Fineline Electronix Malaysia Sdn. Bhd. (“MFM”); one located in Arizona: Aurora Optical, Inc. (“Aurora Optical”); and one located in Cambridge, England: MFLEX UK Limited, formerly known as Pelikon Limited (“MFE”). All significant intercompany transactions and balances have been eliminated in consolidation.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s 2010 Annual Report on Form 10-K. The financial information presented in the accompanying statements reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the periods indicated. All such adjustments are of a normal recurring nature. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States.

Fair Value of Financial Instruments

The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value due to their short maturities. Derivative financial instruments are recognized at fair value based on observable market-based inputs of foreign currency spot and forward rates quoted by major financial institutions.

Inventories

Inventories are comprised of the following:

	June 30, 2011		September 30, 2010
Raw materials and supplies	$	22,234	$	32,134
Work-in-progress		18,869		19,855
Finished goods		32,182		24,944
	$	73,285	$	76,933

4

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

Property, Plant and Equipment

Property, plant and equipment, net, are comprised of the following:

	June 30, 2011			September 30, 2010
Land	$	3,400		$	3,730
Building		72,590			55,688
Machinery and equipment		264,069			223,518
Computers and capitalized software		12,220			12,106
Leasehold improvements		15,288			16,550
Construction-in-progress		22,520			23,886
	$	390,087		$	335,478
Accumulated depreciation and amortization		(177,765	)		(150,196	)
	$	212,322		$	185,282

Product Warranty Accrual

The Company typically warrants its products for up to 36 months. The standard warranty requires the Company to replace defective products returned to the Company at no cost to the customer. The Company records an estimate for warranty related costs at the time revenue is recognized based on historical amounts incurred for warranty expense and historical return rates. The warranty accrual is included in accrued liabilities in the accompanying condensed consolidated balance sheets.

Changes in the product warranty accrual for the three months ended June 30, 2011 and 2010 were as follows:

	Balance at April 1		Warranty Expenditures			Provision for (Benefit From) Estimated Warranty Cost			Balance at June 30
Fiscal 2011	$	177	$	(366	)	$	740		$	551
Fiscal 2010	$	609	$	(198	)	$	(62	)	$	349

Changes in the product warranty accrual for the nine months ended June 30, 2011 and 2010 were as follows:

	Balance at October 1		Warranty Expenditures			Provision for Estimated Warranty Cost		Balance at June 30
Fiscal 2011	$	463	$	(790	)	$	878	$	551
Fiscal 2010	$	541	$	(1,647	)	$	1,455	$	349

Derivative Financial Instruments

The Company’s derivative financial instruments are designated to economically hedge the exposure of future cash flows denominated in non-U.S. dollar currency. Derivative financial instruments are measured at fair value and recorded in the condensed consolidated balance sheets as either assets or liabilities. Changes in the fair value of the derivative financial instruments are recorded each period in the condensed consolidated statements of operations or other comprehensive income, depending on whether the derivative instruments are designated as part of the hedge transaction, and if so, the type of hedge transaction.

The Company evaluates its derivative financial instruments as either cash flow hedges (forecasted transactions), fair value hedges (changes in fair value related to recognized assets or liabilities) or derivative financial instruments that do not qualify for hedge accounting. To qualify for hedge accounting, a derivative financial instrument must be highly effective in mitigating the designated risk of the hedged item. For derivative financial instruments that do not qualify for hedge accounting, changes in the fair value are reported in current period earnings.

The Company designates its derivative financial instruments as non-hedge derivatives and records its foreign currency forward contracts as either assets or liabilities in the condensed consolidated balance sheets. Changes in the fair value of the derivative financial instruments that arise due to fluctuations in the forward exchange rates are recognized in earnings each period as other income (expense), net in the condensed consolidated statements of operations. Realized gains (losses) will be recognized at maturity as other income (expense), net in the condensed consolidated statements of operations. The cash flows

5

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

from derivative financial instruments are classified as cash flows from operating activities in the condensed consolidated cash flows statements. The Company recognized unrealized losses of $50 during the three and nine months ended June 30, 2011 and $0 during the three and nine months ended June 30, 2010, respectively, related to outstanding derivative financial instruments. See Note 9 for further information on derivative financial instruments.

Net Income Per Share—Basic and Diluted

Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding. In computing diluted earnings per share, the weighted average number of shares outstanding is adjusted to reflect the effect of potentially dilutive securities. The impact of potentially dilutive securities is determined using the treasury stock method.

The following table presents a reconciliation of basic and diluted shares:

	Three Months Ended June 30,				Nine Months Ended June 30,
	2011		2010		2011		2010
Basic weighted-average number of common shares outstanding		24,092,048		25,417,674		24,004,063		25,379,381
Dilutive effect of potential common shares		239,683		345,188		321,004		415,187
Diluted weighted-average number of common and potential common shares outstanding		24,331,731		25,762,862		24,325,067		25,794,568
Potential common shares excluded from the per share computations as the effect of their inclusion would be anti-dilutive		301,476		174,400		280,817		148,293

Commitments and Contingencies

Litigation

The Company is involved in litigation from time to time in the ordinary course of business. Management does not believe the outcome of any currently pending matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Other Commitments

As of June 30, 2011 and September 30, 2010, the Company had outstanding purchase and other commitments, primarily related to capital projects at its various facilities, which totaled $35,176 and $38,054, respectively.

Pursuant to the laws applicable to the Peoples’ Republic of China’s Foreign Investment Enterprises, the Company’s two wholly owned subsidiaries in China, MFC and MFLEX Chengdu, are restricted from paying cash dividends on 10% of after-tax profit, subject to certain cumulative limits. These restrictions on net income as of June 30, 2011 and September 30, 2010 were $15,962 and $13,386, respectively.

Significant Concentrations

Net sales to the Company’s largest Original Equipment Manufacturer (“OEM”) customers, inclusive of net sales made to their designated sub-contractors, as a percentage of total sales, are presented below:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2011			2010			2011			2010
OEM C		54	%		46	%		41	%		47	%
OEM D		34	%		38	%		45	%		39	%

6

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

Net sales into the Company’s largest sectors, as a percentage of total sales, are presented below:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2011			2010			2011			2010
Smartphones		72	%		64	%		85	%		63	%
Tablets		23	%		2	%		10	%		1	%
Consumer electronics		1	%		28	%		1	%		30	%

Beginning in the second fiscal quarter of 2011, the Company elected to disclose net sales information for the tablets sector separate from the consumer electronics sector. All of these sectors are subject to economic cycles and have experienced periods of slowdown in the past.

3. Lines of Credit

In July 2010, MFC entered into a credit line agreement with Agricultural Bank of China, Suzhou Wuzhong Sub-branch (“ABC”), which provides for a borrowing facility for 200,000 Chinese renminbi (“RMB”) ($30,904 at June 30, 2011). The line of credit will mature in July 2013.

In March 2010, MFC1 and MFC2 entered into credit line agreements with China Construction Bank, Suzhou Industry Park Sub-Branch (“CCB”), which provide for two borrowing facilities, for 150,000 RMB each ($23,178 each at June 30, 2011). The lines of credit will mature in March 2013.

In February 2009, the Company and MFLEX Singapore entered into a Loan and Security Agreement with Bank of America, N.A., as a lender and agent (“BOA”), for a senior revolving credit facility in an amount up to $30,000, which may be increased to $60,000 at the Company’s discretion upon satisfaction of certain additional requirements. The line of credit will mature in February 2012.

A summary of the lines of credit is as follows:

	Amounts Available at				Amounts Outstanding at
	June 30, 2011		September 30, 2010		June 30, 2011		September 30, 2010
Line of credit (ABC)	$	30,904	$	29,846	$	—	$	—
Line of credit (CCB)		46,356		44,768		—		—
Line of credit (BOA)		20,526		30,000		—		—
	$	97,786	$	104,614	$	—	$	—

As of June 30, 2011, the Company was in compliance with all covenants under the lines of credit.

4. Segment information

Based on the evaluation of the Company’s internal financial information, management believes that the Company operates in one reportable segment in which it is primarily engaged in the engineering, design and manufacture of flexible circuit boards along with related component assemblies. The Company operates in four geographical areas: United States, China, Singapore and Other (which includes Malaysia and the United Kingdom). Net sales are presented based on the country in which the sales originate, which is where the legal entity is domiciled. The financial results of the Company’s geographic segments are presented on a basis consistent with the condensed consolidated financial statements. Segment net sales and assets amounts include intra-company product sales transactions and subsidiary investment amounts, respectively, which are offset in the elimination line.

7

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

Financial information by geographic segment is as follows:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2011			2010			2011			2010
Net sales
United States	$	4,980		$	10,718		$	16,985		$	56,582
China		176,566			182,104			577,280			474,476
Singapore		184,916			181,072			619,920			531,755
Other		233			121			374			574
Eliminations		(174,857	)		(192,966	)		(574,497	)		(498,764	)
Total	$	191,838		$	181,049		$	640,062		$	564,623
Operating income (loss)
United States	$	(3,081	)	$	(3,125	)	$	(8,412	)	$	(10,425	)
China		5,498			10,659			13,637			21,045
Singapore		9,246			2,074			41,754			32,158
Other		(783	)		(4,536	)		(2,586	)		(10,505	)
Eliminations		(256	)		(523	)		(537	)		(496	)
Total	$	10,624		$	4,549		$	43,856		$	31,777
Depreciation and amortization
United States	$	934		$	985		$	2,733		$	3,496
China		10,688			8,830			30,750			28,707
Singapore		24			17			72			37
Other		48			687			162			2,019
Total	$	11,694		$	10,519		$	33,717		$	34,259
							June 30, 2011			September 30, 2010
Total assets
United States							$	170,110		$	192,559
China								335,510			285,945
Singapore								272,717			268,186
Other								5,228			5,873
Eliminations								(218,024	)		(190,242	)
Total							$	565,541		$	562,321

5. Equity Incentive Plans

Stock Options

Stock option activity for the nine months ended June 30, 2011 under the Company’s 2004 Stock Incentive Plan (the “2004 Plan”) is summarized as follows:

	Number of Shares			Weighted- Average Exercise Price		Aggregate Intrinsic Value		Weighted- Average Remaining Contractual Life
Options outstanding at September 30, 2010		328,599		$	11.57
Granted		—			—
Exercised		(89,619	)		13.94
Forfeited		(2,700	)		10.00
Options outstanding and exercisable at June 30, 2011		236,280		$	10.69	$	2,581		3.0
Vested and expected to vest at June 30, 2011		236,280		$	10.69	$	2,581		3.0

8

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

No compensation costs were recognized during the three and nine months ended June 30, 2011 and 2010 related to stock options. The aggregate intrinsic value of stock options exercised was $0 and $1,346 during the three and nine months ended June 30, 2011 and was $887 and $3,218 during the three and nine months ended June 30, 2010, respectively. No unearned compensation existed as of June 30, 2011 related to non-vested stock options.

Service and Performance-Based Restricted Stock Units

During the three and nine months ended June 30, 2011, the Company granted service-based restricted stock units (“RSU” or “RSUs”) equal to 5,665 and 212,327 shares, respectively, of the Company’s common stock. These grants were made under the 2004 Plan to certain employees (including executive officers) and directors at no cost to such individual. Each RSU represents one hypothetical share of the Company’s common stock, without voting or dividend rights. The RSUs granted to employees vest over a period of three years with one-third vesting on each of the anniversary dates of the grant date. Unearned compensation related to the RSUs is determined based on the fair value of the Company’s common stock on the date of grant and is amortized to expense over the vesting period using the straight-line method.

On November 15, 2010, the Company’s board of directors (the “Board”) or a committee thereof (in either event, the “Administrator”) approved the grant of 94,879 performance-based RSUs (the “November 2010 Awards”). The November 2010 Awards vest upon the achievement of defined performance and market objectives pertaining to each grant, with vesting to occur on or about November 30, 2013. Two-thirds of the November 2010 Awards contained performance conditions whereby the Company recorded share-based compensation cost based on the grant-date fair value and the probability that the performance metrics will be achieved. At the end of each reporting period, the Company evaluates the probability that the performance-based RSUs will vest. If the Company determines that the vesting of any of the outstanding performance-based RSUs is not probable, the compensation expense related to those performance-based RSUs is reversed in the period in which this determination is made.

One-third of the November 2010 Awards contained both market and performance conditions, whereby the market condition was measured by determining the Company’s total shareholder return (“TSR”) for the three year period beginning fiscal 2011 through fiscal 2013 versus the TSR of the Russell 2000 Index for the same period. An award with a market condition is accounted for and measured differently than an award that has a performance or service condition. The effect of a market condition is reflected in the award’s fair value on the grant date (e.g., a discount may be taken when estimating the fair value of an RSU to reflect the market condition). The fair value may be lower than the fair value of an identical award that has only a service or performance condition because those awards will not include a discount on the fair value. All compensation costs for an award that has a market condition will be recognized if the requisite service period is fulfilled, even if the market condition is never satisfied. The estimated per share fair value of the portion of the November 2010 Awards containing both market and performance conditions was $16.47 utilizing the following weighted-average assumptions:

	November 2010 Awards			Russell 2000 Index Benchmark Inputs
Expected stock return/discount rate1		0.64	%		0.64	%
Dividend yield		0.00	%		0.00	%
Volatility2		65.00	%		25.00	%
Test start date3		9/30/2010			9/30/2010
Common share price3	$	21.99		$	676.14
Expected vesting period (in years)		3.00			N/A

¹  The expected stock return/discount rate was based on the yield to maturity of short-term government bonds over the expected term as of the grant dates.

²  Volatilities are selected as of fiscal year end dates for the Company given the vesting provisions are based on the TSR over a fiscal period.

³  The common stock price input at the grant date was based on the closing price for the Company’s common stock and the Russell 2000 Index as of September 30, 2010, which was $21.99 and $676.14, respectively. The Company selected the September 30, 2010 prices given that the measurement period for the vesting objective started on September 30, 2010.

During the third fiscal quarter of 2011, the two-thirds of the November 2010 Awards which contained only performance conditions were deemed not probable of meeting such objectives, and as a result, the Company reversed $216 of compensation costs related to these awards.

9

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

On November 16, 2009, the Administrator approved the grant of 117,826 performance-based RSUs (the “November 2009 Awards”). The November 2009 Awards vest upon the achievement of defined performance objectives pertaining to each grant, with vesting to occur on or about November 30, 2012. During the third fiscal quarter of 2011, the November 2009 Awards were deemed not probable of meeting the defined performance objectives, and as a result, the Company reversed $1,251 of compensation costs related to these awards.

RSU activity for the nine months ended June 30, 2011 under the 2004 Plan is summarized as follows:

	Number of Shares			Weighted- Average Grant- Date Fair Value
Non-vested shares outstanding at September 30, 2010		479,019		$	21.68
Granted		307,206			22.38
Vested		(186,463	)		19.34
Forfeited		(51,953	)		23.37
Non-vested shares outstanding at June 30, 2011		547,809		$	22.71

The Company recognized compensation costs related to RSUs of $(406) and $2,272 during the three and nine months ended June 30, 2011 and $1,246 and $3,693 during the three and nine months ended June 30, 2010, respectively. The weighted-average grant-date fair value of nonvested RSUs granted during the nine months ended June 30, 2011 and 2010 was $22.38 and $25.94, respectively. The weighted-average grant-date fair value of RSUs vested during the nine months ended June 30, 2011 and 2010 was $19.34 and $17.68, respectively. Unearned compensation of $5,982 existed as of June 30, 2011 related to nonvested RSUs, which will be recognized into expense over the weighted-average remaining contractual life of the nonvested RSUs of 1.4 years.

Stock Appreciation Rights

During the nine months ended June 30, 2011, the Administrator approved the grant of stock appreciation rights (“SSAR” or “SSARs”) to be settled in Company common stock. These grants were made under the 2004 Plan to certain employees (including executive officers) at no cost to such individual. Each SSAR has a base appreciation amount that is equal to the closing price of a share of the Company’s common stock on each applicable grant date as reported on the NASDAQ Global Select Market. The Company’s SSARs are treated as equity awards and are measured using the initial compensation element of the award at the time of grant and the expense is recognized over the requisite service period (the vesting period).

On November 15, 2010, the Administrator approved the grant of 125,780 SSARs (the “November 2010 SSARs”). The November 2010 SSARs vest over a period of three years with one-third vesting on each November 15, 2011, 2012 and 2013, and will expire on November 14, 2020. The grant date fair value of the November 2010 SSARs was estimated at $10.22 using the Black-Scholes valuation pricing model assuming a risk-free interest rate of 0.78%, zero expected dividends, expected volatility of 66.81% and an expected term of 3.3 years.

SSARs activity for the nine months ended June 30, 2011 under the 2004 Plan is summarized as follows:

	Number of Shares			Weighted- Average Exercise Price		Aggregate Intrinsic Value		Weighted- Average Remaining Contractual Life
SSARs outstanding at September 30, 2010		295,282		$	21.16
Granted		125,780			22.17
Exercised		—			—
Forfeited		(50,659	)		21.60
SSARs outstanding at June 30, 2011		370,403		$	21.44	$	823		8.48
SSARs expected to vest after June 30, 2011		354,705		$	21.37	$	809		8.47

The Company recognized compensation costs of $192 and $717 during the three and nine months ended June 30, 2011 and $320 and $712 during the three and nine months ended June 30, 2010, respectively, related to SSARs. No SSARs were

10

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

exercised or were exercisable during the nine months ended June 30, 2011 and 2010. Unearned compensation as of June 30, 2011 was $1,730 related to non-vested SSARs, which will be recognized into expense over a weighted-average period of 1.4 years.

6. Share Repurchase Program

On December 5, 2008, the Board approved the establishment of a share repurchase program for up to 2,250,000 shares in the aggregate of the Company’s common stock on the open market. This amount represented approximately nine percent of the Company’s common stock outstanding as of June 30, 2011. As of December 31, 2010, the Company had completed the repurchase of all shares authorized for repurchase under this program.

It is the Company’s intention to buy back, from time to time, enough shares of the Company’s stock (pursuant to 10b5-1 stock repurchase plan(s)) to offset the dilution of the shares actually issued pursuant to grants under the 2004 Plan. In accordance with this intention, the Board has provided a committee with the discretion to execute a stock repurchase program providing for the repurchase of up to 1,100,000 shares in the aggregate of the Company’s common stock on the open market. The timing, price and volume of repurchases will be based on market conditions, relevant securities laws and other factors. Repurchases of common stock will be made under Rule 10b5-1 plans, which permit common stock to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. To date, the Company has not entered into any such repurchase plan.

7. Income Taxes

As of June 30, 2011, the liability for income taxes associated with uncertain tax positions increased to $14,149 from $11,372 as of September 30, 2010. On a net basis, as of June 30, 2011 and September 30, 2010, these liabilities are reduced by $4,818 and $4,723, respectively, from offsetting tax benefits associated with the correlative effects of potential transfer pricing adjustments, state income taxes and timing adjustments. The net amount of $9,331 at June 30, 2011 and $6,649 at September 30, 2010, if recognized, would favorably affect the Company’s effective tax rate. The Company anticipates that there will be changes to the unrecognized tax benefit associated with uncertain tax positions due to the expiration of statutes of limitation, payment of tax on amended returns, audit settlements and other changes in reserves. However, due to the uncertainty regarding the timing of these events, a current estimate of the range of changes that may occur within the next twelve months cannot be made.

The Company currently enjoys tax incentives for certain of its Asian operations. Certain Asian operations are subject to taxes at a rate of 10% of their profits. For the nine months ended June 30, 2011, the Company realized tax savings for these operations. However, the tax incentive may be challenged, modified or eliminated by taxing authorities or changes in law.

8. Impairment and Restructuring

Anaheim (Fiscal Year 2010)

In February 2010, the Company committed to close one of its facilities in Anaheim as part of a strategic effort to move more functions, specifically low-volume production and process research and development associated with the Company’s flex and flex assembly processes, to Asia. Based on the Company’s evaluation of the recoverability of impacted long-lived assets, pre-tax asset impairment charges of $2,117 were recorded during fiscal 2010, including $1,480 of machinery and equipment and $637 of leasehold improvements. The fair value of the long-lived assets was determined based on quoted market prices for similar assets. In addition, a net gain on sale of assets of $578, pre-tax one-time termination benefits charges of $1,213 and other restructuring-related charges of $1,161 were recorded during fiscal 2010. The total amount expected to be incurred in connection with the closure of the facility in Anaheim was $3,913 as of September 30, 2010, all of which was recorded during fiscal 2010.

During the third fiscal quarter of 2011, the Company evaluated a Company-owned building in Anaheim under the “Long-Lived Assets to Be Disposed of by Sale” classification, and determined that the building should be classified as assets held for sale as of June 30, 2011. Based on the Company’s evaluation of the recoverability of the impacted long-lived assets, a pre-tax impairment charge of $92 was recorded in the third fiscal quarter of 2011. As of June 30, 2011, the Company recorded $638 as assets held for sale related to the Company-owned building in Anaheim.

Aurora Optical (Fiscal Year 2008)

In the third fiscal quarter of 2011, the Company recorded impairment charges of $907 related to its Arizona facility of Aurora Optical, which was closed during the fourth fiscal quarter of 2008. The related charges were due to further market decline in commercial real estate values in fiscal 2011. As of June 30, 2011, the Company recorded $2,051 as assets held for sale related to the former Aurora Optical land and building.

11

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

Restructuring Reserve Activity

The following table reflects the movement activity of the restructuring reserve for the nine months ended June 30, 2011:

	One-Time Termination Benefits			Other			Total
Accrual balance as of September 30, 2010	$	547		$	502		$	1,049
Restructuring charges		—			—			—
Utilization		(524	)		(497	)		(1,021	)
Adjustments		(23	)		7			(16	)
Accrual balance as of June 30, 2011	$	—		$	12		$	12

9. Derivative Financial Instruments

Foreign Currency Forward Contracts

The Company transacts business in various foreign countries and is therefore exposed to gains and losses resulting from fluctuations in foreign currency exchange rates relating to purchases, obligations, and monetary assets and liabilities that are denominated in currencies other than the Company’s reporting currency. The Company has established foreign currency risk management programs to protect against volatility in the value of non-U.S. dollar denominated monetary assets and liabilities, and of future cash flows caused by changes in foreign currency exchange rates. As a result, the Company enters into certain foreign currency forward contracts to hedge its aforementioned currency exposures.

The Company accounts for all of its derivative instruments in accordance with the relevant FASB authoritative accounting guidance for derivatives and hedges, which requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the condensed consolidated balance sheets. As of June 30, 2011, the aggregate notional amount of the Company’s outstanding foreign currency non-deliverable forward contracts (“NDF Contracts”) is summarized below:

Currency	Buy/Sell	Foreign Currency Amount		Notional Contract Value in USD
Foreign currency non-hedge derivatives:
RMB	Buy	¥	64,330	$	10,000

The changes in fair value of its derivative instruments are recognized in earnings during the period of change as other income (expense), net in the condensed consolidated statements of operations. The Company recognized realized losses of $11 during the three and nine months ended June 30, 2011 and $0 during the three and nine months ended June 30, 2010, respectively, related to settlement of NDF Contracts. The Company also recognized unrealized losses of $50 during the three and nine months ended June 30, 2011 and $0 during the three and nine months ended June 30, 2010, respectively, related to outstanding NDF Contracts. See Note 10 for further information on fair value measurements.

10. Fair Value Measurements

Per FASB authoritative guidance, the Company classifies and discloses the fair value of assets and liabilities in one of the following three categories:

Level 1: quoted market prices in active markets for identical assets and liabilities

Level 2: observable market based inputs or unobservable inputs that are corroborated by market data

Level 3: unobservable inputs that are not corroborated by market data

12

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(unaudited)

Derivative Financial Instruments

For recognition purposes, on a recurring basis, the Company’s assets and liabilities related to derivative financial instruments were measured at fair value as of June 30, 2011. The fair value was determined based on Level 2 inputs, which consist of observable market-based inputs of foreign currency spot and forward rates quoted by major financial institutions. The Company’s derivative financial instruments measured at fair value on a recurring basis subject to the disclosure requirements as defined under the FASB authoritative accounting guidance were as follows:

	Fair Value Measurements of Assets and Liabilities on a Recurring Basis as of June 30, 2011
	Level 1		Level 2			Level 3
Accrued liabilities:
NDF contracts		—	$	(50	)		—
	$	—	$	(50	)	$	—

There were no assets and liabilities measured at fair value on a recurring basis as of September 30, 2010.

Long-lived Assets

For recognition purposes, on a non-recurring basis, the Company measured certain of its long-lived assets at fair value as of June 30, 2011. The fair value was determined based on Level 2 inputs, which consist of unobservable inputs that are corroborated by market data, whereby reflecting the price that would be received for these assets in their current condition and location. The fair value of the long-lived assets was determined based on a current market value comparison analysis with similar assets in the area. The fair value less costs to sell including broker commissions, legal and title transfer fees and closing costs were incorporated to determine the fair value as of June 30, 2011.

	Fair Value Measurements of Assets and Liabilities on a Non-Recurring Basis as of June 30, 2011
	Level 1		Level 2		Level 3
Assets held for sale:
Long-lived assets		—	$	2,689		—
	$	—	$	2,689	$	—

The long-lived assets had carrying amounts of $3,688, which were written down to their fair value of $2,689, resulting in impairment charges of $999 (of which $242 were costs to sell) included in earnings during the third fiscal quarter of 2011.

13

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements that involve a number of risks and uncertainties. These forward-looking statements include, but are not limited to, statements and predictions as to our expectations regarding our revenues, net sales, sales, full year net sales growth, net income, operating expenses, research and development expenses, earnings, operations, gross margins, including without limitation, our targeted gross margin range, achievement of margins within or outside of such range and factors that could affect gross margins, yields, anticipated cash needs and uses of cash, capital requirements and capital expenditures, payment terms, expected tax rates, results of audits of us in China and the U.S., needs for additional financing, use of working capital, the benefits and risks of our China operations, anticipated growth strategies, ability to attract customers and diversify our customer base, including without limitation the relative size of each customer to us, sources of net sales, anticipated trends and challenges in our business and the markets in which we operate, trends regarding the use of flex in smartphones, feature phones, tablets and other consumer electronic devices, the adequacy and expansion of our facilities, capability, capacity and equipment, the impact of economic and industry conditions on our customers and our business, current and upcoming programs and product mix and the learning curves associated with our programs, market opportunities and the utilizations of flex and flex assemblies, customer demand, our competitive position, critical accounting policies and the impact of recent accounting pronouncements. Additional forward-looking statements include, but are not limited to, statements pertaining to other financial items, plans, strategies or objectives of management for future operations, our financial condition or prospects, and any other statement that is not historical fact, including any statement which is preceded by the word “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,” “predict,” “aim,” “potential,” “plan,” or similar words. For all of the foregoing forward-looking statements, we claim the protection of the Private Securities Litigation Reform Act of 1995. Actual events or results may differ materially from our expectations. Important factors that could cause actual results to differ materially from those stated or implied by our forward-looking statements include, but are not limited to, the impact of changes in demand for our products, our success with new and current customers, our ability to develop and deliver new technologies, our ability to diversify our customer base, our effectiveness in managing manufacturing processes and costs and expansion of our operations, the degree to which we are able to utilize available manufacturing capacity, achieve expected yields and obtain expected gross margins, the impact of competition, the economy and technological advances, and the risks set forth below under “Item 1A. – Risk Factors.” These forward-looking statements represent our judgment as of the date hereof. We disclaim any intent or obligation to update these forward-looking statements.

Overview

We are a global provider of high-quality, technologically advanced flexible printed circuits and value-added component assembly solutions to the electronics industry. We believe that we are one of a limited number of manufacturers that provide a seamless, integrated flexible printed circuit and assembly solution from design and application engineering and prototyping through high-volume fabrication, component assembly and testing. We target our solutions within the electronics market and, in particular, we focus on applications where flexible printed circuits facilitate human interaction with an electronic device and are the enabling technology in achieving a desired size, shape, weight or functionality of the device. Current applications for our products include mobile phones, smart mobile devices, tablets, consumer products, portable bar code scanners, computer/storage devices and medical devices. We provide our solutions to original equipment manufacturers (“OEMs”) such as Apple, Inc. and Research In Motion Limited and to electronic manufacturing services (“EMS”) providers such as Foxconn Electronics, Inc., Jabil Circuit, Inc., and Flextronics International Ltd. Our business model, and the way we approach the markets which we serve, is based on value added engineering and providing technology solutions to our customers facilitating the miniaturization of portable electronics. Through early supplier involvement with customers, we look to assist in the development of new designs and processes for the manufacturing of their products and, through value added component assembly of components on flex, seek to provide a higher level of product within their supply chain structure. This approach is relatively unique and may or may not always fit with the operating practices of all OEMs. Our ability to add to our customer base may have a direct impact on the relative percentage of each customer’s revenue to total revenues during any reporting period.

14

We typically have numerous programs in production at any particular time, the life cycle for which is typically around one year. The programs’ prices are subject to intense negotiation and are determined on a program by program basis, dependent on a wide variety of factors, including without limitation, expected volumes, assumed yields, material costs, actual yields, and the amount of third party components within the program. Our profitability is dependent upon how we perform against our targets and the assumptions on which we base our prices for each particular program. Our volumes, margins and yields also vary from program to program and, given various factors and assumptions on which we base our prices, are not necessarily indicative of our profitability. In fact, some lower-priced programs have higher margins while other higher-priced programs have lower margins. Given that the programs in production vary from period to period and the pricing and margins between programs vary widely, volumes are not necessarily indicative of our performance. For example, we could experience an increase in volumes for a particular program during a particular period, but depending on that program’s margins and yields and the other programs in production during that period, those higher volumes may or may not result in an increase in overall profitability.

Critical Accounting Policies

Information with respect to our critical accounting policies which we believe have the most significant effect on our reported results and require subjective or complex judgments of management are contained on pages 30-33 in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended September 30, 2010.

Comparison of the Three Months Ended June 30, 2011 and 2010

The following table sets forth our Statement of Operations data expressed as a percentage of net sales for the periods indicated:

	Three Months Ended June 30,
	2011			2010
Net sales		100.0	%		100.0	%
Cost of sales		87.8			87.7
Gross profit		12.2			12.3
Operating expenses:
Research and development		1.2			2.5
Sales and marketing		2.9			2.8
General and administrative		2.0			2.7
Impairment and restructuring		0.5			1.8
Total operating expenses		6.6			9.8
Operating income		5.6			2.5
Interest income		0.1			0.1
Interest expense		(0.1	)		(0.1	)
Other income (expense), net		0.1			0.1
Income before income taxes		5.7			2.6
Provision for income taxes		(1.1	)		(1.3	)
Net income		4.6	%		1.3	%

Net Sales. Total net sales increased to $191.8 million for the three months ended June 30, 2011, from $181.0 million for the three months ended June 30, 2010. The increase of $10.8 million, or 6.0%, was primarily due to growth in tablet and smartphone programs, partially offset by declines in consumer electronics programs, as further quantified below.

Net sales into the smartphones sector increased to $137.4 million for the three months ended June 30, 2011, from $116.2 million for the three months ended June 30, 2010. The increase of $21.2 million, or 18.2%, was primarily due to higher demand for smartphones from one of our key customers resulting in sales increases to this customer of approximately $32.1 million, partially offset by a reduction in demand for smartphones from another of our key customers resulting in sales decreases to this customer of approximately $4.1 million. For the three months ended June 30, 2011 and 2010, the smartphones sector accounted for approximately 72% and 64% of total sales, respectively.

15

Net sales into the tablets sector increased to $44.4 million for the three months ended June 30, 2011, versus $3.0 million for the three months ended June 30, 2010. The increase of $41.4 million in sales into the tablets sector was primarily due to increased demand for products from one of our key customers in this sector. For the three months ended June 30, 2011 and 2010, the tablets sector accounted for approximately 23% and 2% of total sales, respectively.

Net sales into the consumer electronics sector (which excludes sales into the tablets sector) were $1.4 million for the three months ended June 30, 2011, versus $49.9 million for the three months ended June 30, 2010. The decrease in sales into the consumer electronics sector was due to one of our customer’s programs, which incorporates our flex assembly, reaching the end of its life cycle. Shipments into the consumer electronics sector accounted for approximately 1% and 28% of total net sales for the three months ended June 30, 2011 and 2010, respectively. Going forward, we expect sales into the consumer electronics sector to fluctuate from quarter to quarter based on customer product mix.

For the fourth fiscal quarter of 2011, we expect net sales to be in the range of $190 to $210 million.

Cost of Sales and Gross Profit. Cost of sales as a percentage of net sales increased slightly to 87.8% for the three months ended June 30, 2011 compared to 87.7% for the three months ended June 30, 2010. The increase in cost of sales as a percentage of net sales of 0.1% was primarily attributable to increase in labor costs in China of approximately 150 basis points, the appreciation of the Chinese Yuan of approximately 100 basis points and increased overhead costs from the start-up of our newly added manufacturing capacity in China of approximately 100 basis points. These increases were partially offset by lower operating costs from the consolidation of Anaheim and Malaysia production into our Chinese facilities of approximately 90 basis points and lower material content due to product mix and other offsets resulting in approximately a 250 basis point reduction. Gross profit increased to $23.3 million for the three months ended June 30, 2011 versus $22.2 million for the three months ended June 30, 2010, or 5.0%. As a percentage of net sales, gross profit decreased to 12.2% for the three months ended June 30, 2011 from 12.3% for the three months ended June 30, 2010. For the fourth fiscal quarter of 2011, we expect gross margins to range between 11% and 12% based on our projected product mix and sales volume.

Research and Development. Research and development expense decreased by $2.0 million to $2.4 million for the three months ended June 30, 2011, from $4.4 million for the three months ended June 30, 2010. As a percentage of net sales, research and development expense decreased to 1.2% versus 2.5% in the comparable period of the prior year, due to our decision to move research and development activities to China where labor costs are lower. In addition, we have refocused research and development efforts on a few key research and development activities within the United States, United Kingdom and China operations. We expect research and development expenses to slowly increase as we expand our research and development efforts, mainly in China.

Sales and Marketing. Sales and marketing expense increased by $0.4 million to $5.5 million for the three months ended June 30, 2011, from $5.1 million in the comparable period of the prior year, an increase of 7.8%. The increase was primarily attributable to increased total commissions of $0.5 million as a result of the increased sales volumes previously mentioned, partially offset by the reversal of performance-based equity awards that were deemed not probable of meeting the defined performance objectives during the third fiscal quarter of 2011 of approximately $0.5 million. As a percentage of net sales, sales and marketing expense increased slightly to 2.9% versus 2.8% in the comparable period of the prior year.

General and Administrative. General and administrative expense decreased by $1.0 million to $3.8 million for the three months ended June 30, 2011, from $4.8 million for the three months ended June 30, 2010, a decrease of 20.8%. The decrease was primarily due to the reversal of performance-based equity awards that were deemed not probable of meeting the defined performance objectives during the third fiscal quarter of 2011 of approximately $1.0 million. As a percentage of net sales, general and administrative expense decreased to 2.0% of net sales for the three months ended June 30, 2011 from 2.7% in the comparable period of the prior year.

We expect total operating expenses, as a percentage of net sales, to be approximately 6.5% in the fourth fiscal quarter of 2011.

Impairment and Restructuring. Impairment and restructuring expenses decreased from $3.3 million for the three months ended June 30, 2010 to $1.0 million for the three months ended June 30, 2011. Impairment and restructuring expenses in the third fiscal quarter of 2011 were attributable to asset impairments relating to our held-for-sale properties in Arizona and Anaheim due to market decline in commercial real estate values in fiscal 2011. Impairment and restructuring expenses in the third fiscal quarter of 2010 were attributable to asset impairments relating to our plan to close one of our facilities in Anaheim as part of a strategic effort to move more functions, specifically low volume production and process research and development associated with our flex and flex assembly processes, to Asia. In addition, in the third fiscal quarter of 2010, we incurred asset impairments relating to our plan to close our facility in Malaysia in order to move the related functions to China and one-time termination benefits charges related to our plan to close our Malaysia facility.

Other Income (Expense), Net. Other income, net was $0.3 million for the three months ended June 30, 2011, versus other income, net of $0.2 million for the three months ended June 30, 2010. The increase was primarily the result of net gains from foreign exchange due to the movement of the U.S. dollar versus the Chinese renminbi (“RMB”) and other foreign currencies.

16

Income Taxes. The effective tax rate for the three months ended June 30, 2011 and 2010 was 19.7% and 50.8%, respectively. The third fiscal quarter of 2010 had a higher tax rate primarily due to the write-off of a deferred tax asset related to the closure of our Malaysia facility of $0.9 million. We expect future tax rates to vary if current tax regulations change.

Comparison of the Nine Months Ended June 30, 2011 and 2010

The following table sets forth our Statement of Operations data expressed as a percentage of net sales for the periods indicated:

	Nine Months Ended June 30,
	2011			2010
Net sales		100.0	%		100.0	%
Cost of sales		86.6			85.7
Gross profit		13.4			14.3
Operating expenses:
Research and development		1.2			1.9
Sales and marketing		3.0			3.1
General and administrative		2.1			2.8
Impairment and restructuring		0.2			0.9
Total operating expenses		6.5			8.7
Operating income		6.9			5.6
Interest income		0.1			0.1
Interest expense		—			(0.1	)
Other income (expense), net		—			0.1
Income before income taxes		7.0			5.7
Provision for income taxes		(1.4	)		(1.5	)
Net income		5.6	%		4.2	%

Net Sales. Total net sales increased to $640.1 million for the nine months ended June 30, 2011, from $564.6 million for the nine months ended June 30, 2010. The increase of $75.5 million, or 13.4%, was primarily due to growth in smartphone and tablet programs, partially offset by declines in consumer electronics programs as further quantified below.

Net sales into the smartphones sector increased to $545.0 million for the nine months ended June 30, 2011, from $352.9 million for the nine months ended June 30, 2010. The increase of $192.1 million, or 54.4%, was primarily due to higher demand for smartphones from two of our key customers resulting in sales increases of approximately $170.6 million to these customers. For the nine months ended June 30, 2011 and 2010, the smartphones sector accounted for approximately 85% and 63% of total sales, respectively.

Net sales into the tablets sector were $64.4 million for the nine months ended June 30, 2011, versus $4.6 million for the nine months ended June 30, 2010. The increase of $59.8 million in sales into the tablets sector was primarily due to increased demand for products from one of our key customers in this sector. For the nine months ended June 30, 2011 and 2010, the tablets sector accounted for approximately 10% and 1% of total net sales, respectively.

Net sales into the consumer electronics sector were $7.7 million for the nine months ended June 30, 2011, versus $169.5 million for the nine months ended June 30, 2010. The decrease in sales into the consumer electronics sector was due to one of our customer’s programs, which incorporates our flex assembly, reaching the end of its life cycle. Shipments into the consumer electronics sector accounted for approximately 1% and 30% of total net sales for the nine months ended June 30, 2011 and 2010, respectively.

Cost of Sales and Gross Profit. Cost of sales as a percentage of net sales increased to 86.6% for the nine months ended June 30, 2011 compared to 85.7% for the nine months ended June 30, 2010. The increase in cost of sales as a percentage of net sales of 0.9% was primarily attributable to an increase in labor and overhead as a percentage of sales of 3.0% as a result higher labor costs in China, the appreciation of the Chinese Yuan and additional fixed costs associated with the start-up of our newly added manufacturing capacity in China, partially offset by a decrease in material cost as a percentage of sales of 2.1% as a result of a shift in product mix to less material intensive programs. Gross profit increased to $85.5 million for the nine months

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ended June 30, 2011, versus $81.0 million for the nine months ended June 30, 2010, or 5.6%. As a percentage of net sales, gross profit decreased to 13.4% for the nine months ended June 30, 2011 from 14.3% for the nine months ended June 30, 2010.

Research and Development. Research and development expense decreased by $2.7 million to $8.0 million for the nine months ended June 30, 2011, from $10.7 million for the nine months ended June 30, 2010. As a percentage of net sales, research and development expense decreased to 1.2% versus 1.9% in the comparable period of the prior year. The decrease was primarily attributable to our decision to move research and development activities to China where labor costs are lower. In addition, we have refocused research and development efforts on a few key research and development activities within the United States, United Kingdom and China.

Sales and Marketing. Sales and marketing expense increased by $1.7 million to $19.3 million for the nine months ended June 30, 2011, from $17.6 million in the comparable period of the prior year, an increase of 9.7%. The increase was primarily attributable to increased total commissions of $1.7 million as a result of the increased sales volumes previously mentioned, partially offset by the reversal of performance-based equity awards that were deemed not probable of meeting the defined performance objectives during the third fiscal quarter of 2011 of approximately $0.5 million. As a percentage of net sales, sales and marketing expense decreased slightly to 3.0% versus 3.1% in the comparable period of the prior year.

General and Administrative. General and administrative expense decreased by $2.1 million to $13.5 million for the nine months ended June 30, 2011, from $15.6 million for the nine months ended June 30, 2010, a decrease of 13.5%. The decrease was primarily due to the reversal of performance-based equity awards that were deemed not probable of meeting the defined performance objectives during the third fiscal quarter of fiscal 2011 of approximately $1.0 million, coupled with efforts in the prior fiscal year to realign functions and reduce outside service costs on a global basis. As a percentage of net sales, general and administrative expense decreased to 2.1% of net sales for the nine months ended June 30, 2011 from 2.8% in the comparable period of the prior year.

Impairment and Restructuring. Impairment and restructuring expenses decreased from $5.3 million for the nine months ended June 30, 2010 to $1.0 million for the nine months ended June 30, 2011. Impairment and restructuring expenses for the nine months ended June 30, 2011 were attributable to asset impairments relating to our held-for-sale properties in Arizona and Anaheim due to market decline in commercial real estate values in fiscal 2011. Impairment and restructuring expenses for the nine months ended June 30, 2010 was primarily attributable to asset impairments relating to our plan to close one of our facilities in Anaheim as part of a strategic effort to move more functions, specifically low volume production and process research and development associated with our flex and flex assembly processes, to Asia. In addition, we incurred asset impairments and one-time termination benefits charges relating to our plan to close our facility in Malaysia in order to move the related functions to China as part of our cost reduction efforts in fiscal 2010.

Other Income (Expense), Net. Other income, net was $0.3 million for the nine months ended June 30, 2011 versus other income, net of $0.7 million for the nine months ended June 30, 2010. The decrease was primarily the result of net losses from foreign exchange due to the movement of the U.S. dollar versus the RMB and other foreign currencies.

Income Taxes. The effective tax rate for the nine months ended June 30, 2011 and 2010 was 20.2% and 26.6%, respectively.

Liquidity and Capital Resources

Our principal sources of liquidity have been cash provided by operations and our ability to borrow under our various credit facilities. Our principal uses of cash have been to finance working capital, facility expansions, stock repurchases and other capital expenditures. We anticipate these uses will continue to be our principal uses of cash in the future. Global financial and credit markets have been volatile in recent years, and future adverse conditions of these markets could negatively affect our ability to secure funds or raise capital at a reasonable cost, if needed.

We believe that funds generated from our operations and available from our borrowing facilities will be sufficient to fund current business operations as well as anticipated growth over at least the next fiscal year, without the need to repatriate earnings.

Changes in the principal components of operating cash flows during the nine months ended June 30, 2011 were as follows:

• Our net accounts receivable decreased to $135.5 million as of June 30, 2011 from $149.5 million as of September 30, 2010, or 9.4%. The decrease in accounts receivable was primarily due to decreased sales as a result of seasonality, partially offset by our days sales outstanding increasing by five days to 64 days primarily as the result of changes in payment terms with certain customers. Our net inventory balances decreased to $73.3 million as of June 30, 2011 from $76.9 million as of September 30, 2010, a decrease of 4.7%. Days in inventory

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increased three days to 39 days primarily as the result of customer requests to stock finished goods inventory at our hub locations that are close in proximity to their facilities. Our accounts payable decreased to $116.8 million as of June 30, 2011 from $156.9 million as of September 30, 2010, a decrease of 25.6%, mainly as a result of final payments on accrued capital expenditures related to our expansion activities at our third manufacturing facility in Suzhou, China.

• Depreciation and amortization expense was $33.7 million for the nine months ended June 30, 2011, versus $34.3 million for the comparable period of the prior year due to dispositions of equipment associated with our restructuring activities in the United Kingdom, Malaysia and Anaheim, partially offset by an increased fixed asset base in manufacturing operations in China.

Our principal investing and financing activities during the nine months ended June 30, 2011 were as follows:

• Net cash used in investing activities was $38.0 million for the nine months ended June 30, 2011. Capital expenditures included cash purchases of $53.5 million of capital equipment and other assets, which were primarily related to our manufacturing capacity expansion in China. In addition, United States treasury bills amounting to $15.0 million were redeemed during the first fiscal quarter of 2011. As of June 30, 2011, we had outstanding purchase commitments totaling $35.2 million primarily related to capital projects at our various facilities.

• Net cash used in financing activities was approximately $1.0 million for the nine months ended June 30, 2011 and consisted of repurchases of common stock of $0.9 million, $1.3 million of cash used to net share settle equity awards and was partially offset by $1.2 million of proceeds from exercise of stock options. Our loans payable and borrowings outstanding against credit facilities were zero at June 30, 2011 and September 30, 2010.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market Risk

Market risk represents the risk of loss arising from adverse changes in liquidity, market rates and foreign exchange rates. At June 30, 2011, no amounts were outstanding under our loan agreements with Bank of America, N.A., Agricultural Bank of China or China Construction Bank. The amounts outstanding under these loan agreements at any time may fluctuate and we may from time to time be subject to refinancing risk. We do not believe that a change of 100 basis points in interest would have a material effect on our results of operations or financial condition based on our current borrowing level.

Foreign Currency Risk

We derive a substantial portion of our sales outside of the U.S. Approximately $621.8 million, or 97%, of total shipments to these foreign manufacturers during the nine months ended June 30, 2011 were made in U.S. dollars with the remaining balance of our net sales denominated in RMB. We currently have a significant portion of our expenses, more specifically cost of sales, denominated in RMB, whereby a significant appreciation or depreciation in the RMB could materially affect our reported expenses in U.S. dollars. The exchange rate for the RMB to the U.S. dollar has been an average of 6.58 RMB per U.S. dollar for the nine months ended June 30, 2011. To date, we attempt to manage our working capital in a manner to minimize foreign currency exposure and from time to time, we engage in currency hedging activities through use of forward contracts, but such activities may not be able to limit the risks of currency fluctuations and we continue to be vulnerable to appreciation or depreciation of foreign currencies against the U.S. dollar. At June 30, 2011, we had outstanding non-deliverable forward contracts with notional amounts aggregating to approximately 64.3 million RMB (approximately $10.0 million U.S. dollars) and the recorded fair values of the associated liabilities were not material.

Liquidity Risk

We believe our anticipated cash flows from operations are sufficient to fund our operations, including capital expenditure requirements, through at least the next fiscal year. If there was a need for additional cash to fund our operations, we would access our global credit lines.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on an evaluation carried out as of the end of the period covered by this Quarterly Report, under the supervision and with the participation of our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, our CEO and CFO have concluded that, as of the end of such period, our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) are effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1A. Risk Factors

FACTORS THAT MAY AFFECT OUR OPERATING RESULTS

Our business, financial condition, operating results and cash flows can be impacted by a number of factors, including but not limited to those set forth below, any of which could cause our results to be adversely impacted and could result in a decline in the value or loss of an investment in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business.

Risks Related to Our Business

We are, and have historically been, heavily dependent upon the smartphone, tablet and consumer electronics industries, and any downturn in these sectors may reduce our net sales.

For the nine months ended June 30, 2011, 2010 and 2009, approximately 85%, 63% and 54%, respectively, of our net sales were derived from sales to companies that provide products or services into the smartphone industry; approximately 10%, 1% and 0%, respectively, of our net sales derived from sales were to companies that provide products or services into the tablet industry; and approximately 1%, 30% and 24%, respectively, of our net sales were derived from sales to companies that provide products or services into the consumer electronics industry (excluding tablets). In general, these industries are subject to economic cycles and periods of slowdown. Intense competition, relatively short product life cycles and significant fluctuations in product demand characterize these industries, and the industries are also generally subject to rapid technological change and product obsolescence. Fluctuations in demand for our products as a result of periods of slowdown in these markets (including the current economic downturn) or discontinuation of products or modifications developed in connection with next generation products could reduce our net sales.

We depend on a limited number of key customers, and a limited number of programs from those customers, for significant portions of our net sales and if we lose business with any of these customers, our net sales could decline substantially.

For the past several years, a substantial portion of our net sales has been derived from products that are incorporated into products manufactured by or on behalf of a limited number of key customers and their subcontractors, including Apple Inc., Motorola, Inc. and Research in Motion Limited. In addition, a substantial portion of our sales to each customer is often tied to only one, or a small number, of programs. In the fiscal years ended September 30, 2010, 2009 and 2008 approximately 98%, 96% and 95% respectively, of our net sales were to only four customers in the aggregate. Approximately 43%, 43% and 45% of our net sales in each of the fiscal years ended September 30, 2010, 2009 and 2008, respectively, were to one customer (not the same customer in each of the three years) and approximately 85%, 80% and 65% of our net sales were to two of our customers in each of the three years, respectively. In addition, two customers constituted approximately 86% of our net sales in the nine months ended June 30, 2011 and 85% of our net sales in the fiscal year ended September 30, 2010. The loss of a major customer or a significant reduction in sales to a major customer, including due to the lack of commercial success, a product failure of a customer’s program upon which we were relying or limited flex content in a program on which we were relying, would seriously harm our business. Although we are continuing our efforts to reduce dependence on a limited number of customers, net sales attributable to a limited number of customers and their subcontractors are expected to continue to represent a substantial portion of our business for the foreseeable future.

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We will have difficulty selling our products if customers do not design flexible printed circuits and assemblies into their product offerings or our customers’ product offerings are not commercially successful.

We sell our flexible printed circuits and assemblies directly or indirectly to OEMs, who include our flexible circuits and component assemblies in their product offerings. We must continue to design our products into our customers’ product offerings in order to remain competitive. However, our OEM customers may decide not to design flexible printed circuits into their product offerings (or may reduce the amount of flex in a product offering), or may procure flexible printed circuits from one of our competitors. If an OEM selects one of our competitors to provide a product instead of us or switches to alternative technologies developed or manufactured by one or more of our competitors, it becomes significantly more difficult for us to sell our products to that OEM because changing component providers after the initial production runs begin involves significant cost, time, effort and risk for the OEM. Even if an OEM designs one of our products into its product offering, the product may not be commercially successful or may experience product failures, we may not receive any orders from that manufacturer, the OEM may qualify additional vendors for the product or we could be undercut by a competitor’s pricing. Additionally, if an OEM selects one or more of our competitors, they may rely upon such competitors for the life of specific offering and subsequent generations of similar offerings. Any of these events would result in fewer sales and reduced profits for us, and could adversely affect the accuracy of any forward-looking guidance we may give.

Changes in the products our customers buy from us, or in which of our customers buy from us, can significantly affect our capacity, net sales and profitability.

We sell our flexible printed circuits and flex assemblies to a limited number of customers, who typically purchase these products from us for numerous programs at any particular time. Customer programs differ in design and material content and our products’ prices and profitability are dependent on a wide variety of factors, included without limitation, expected volumes, assumed yields, material costs, actual yields and the amount of third-party components within the program. If we lose sales for a program that has higher material content, we may have to replace it with sales for a program that has lower material content, thus requiring additional capacity to generate the same amount of net sales. We may not have such capacity available (or it may not be economically advantageous to acquire such capacity), which could then result in lower net sales. In addition, if we were to utilize our capacity to increase sales of bare flex (flex without assembly), this could also generate lower net sales at potentially different (higher or lower) profitability levels.

Our customers have in the past and likely will continue to cancel their orders, change production quantities, delay production or qualify additional vendors, any of which could reduce our net sales and/or increase our expenses.

Substantially all of our sales are made on a purchase order basis, and we are not always able to predict with certainty the number of orders we will receive or the timing or magnitude of the orders. Our customers may cancel, change or delay product purchase orders with little or no advance notice to us, and we believe customers are doing so with increased frequency. These changes may be for a variety of reasons, including changes in their prospects, the success of their products in the market, reliance on a new vendor and the overall economic forecast. In general, we do not have long-term contractual relationships with our customers that require them to order minimum quantities of our products, and our customers may decide to use another manufacturer or discontinue ordering from us in their discretion. In addition, many of our products are shipped to hubs, and we often have limited visibility and no control as to when our customers pull the inventory from the hub. We have recently seen an increase in the use of hubs by our customers, and our hub balances have been growing. We also have increased risks with respect to inventory control and potential inventory loss, and must rely on third parties for recordkeeping when our products are shipped to a hub. As a result of these factors, we are not always able to forecast accurately the net sales that we will make in a given period. Changes in orders can also result in layoffs and associated severance costs, which in any given financial period could materially adversely affect our financial results.

In addition, we are increasingly being required to purchase materials, components and equipment before a customer becomes contractually committed to an order so that we may timely deliver the expected order to the customer. We may increase our production capacity, working capital and overhead in expectation of orders that may never be placed, or, if placed, may be delayed, reduced or canceled. As a result, we may be unable to recover costs that we incur in anticipation of orders that are never placed, such as costs associated with purchased raw materials, components or equipment. Delayed, reduced or canceled orders could also result in write-offs of obsolete inventory and the underutilization of our manufacturing capacity if we decline other potential orders because we expect to use our capacity to produce orders that are later delayed, reduced or canceled.

Our industry is extremely competitive, and if we are unable to respond to competitive pressures we may lose sales and our market share could decline.

We compete primarily with large flexible printed circuit board manufacturers located throughout Asia, including Taiwan, China, Korea, Japan and Singapore. We believe that the number of companies producing flexible printed circuit boards has increased materially in recent years and may continue to increase. Certain EMS providers have developed or

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acquired their own flexible printed circuit manufacturing capabilities or have extensive experience in electronics assembly, and in the future may cease ordering products from us or even compete with us on OEM programs. In addition, the number of customers in the market has been decreasing through consolidation and otherwise. Furthermore, many companies in our target customer base may move the design and manufacturing of their products to original design manufacturers in Asia. These factors, among others, make our industry extremely competitive. If we are not successful in addressing these competitive aspects of our business, including maintaining or establishing close relationships with customers in markets in which we compete, we may not be able to grow or maintain our market share or net sales.

Our products and their terms of sale are subject to various pressures from our customers, competitors and market forces, any of which could harm our gross profits.

Our selling prices are affected by changes in overall demand for our products, changes in the specific products our customers buy, pricing of competitors’ products, our products’ life cycles and general economic conditions. In addition, from time to time we may elect to reduce the price of certain products we produce in order to gain additional orders on a particular program. A typical life cycle for one of our products has our selling price decrease as the program matures. To offset price decreases during a product’s life cycle, we rely primarily on higher sales volume and improving our manufacturing yield and productivity to reduce a product’s cost. If we cannot reduce our manufacturing costs as prices decline during a product’s life cycle, or if we are required to pay damages to a customer due to a breach of contract or other claim, including due to quality or delivery issues, our cost of sales may increase, which would harm our profitability and could affect our working capital levels.

In addition, our key customers and their subcontractors are able to exert significant pricing pressure on us and often require us to renegotiate the terms of our arrangements with them, including increasing or removing liability and indemnification thresholds and increasing the length of payment terms, among other terms. Increases in our labor costs, especially in China where we may have little or no advance notice of such increases, changes in contract terms, the extension of payment terms and regular price reductions may result in lower gross margins for us. Furthermore, our competitive position is dependent upon the yields and quality we are able to achieve on our products and our level of automation as compared to our competitors. These trends and factors may harm our business and make it more difficult to compete effectively.

Significant product failures or safety concerns about our or our customers’ products could harm our reputation and our business.

Continued improvement in manufacturing capabilities, quality control, material costs and successful product testing capabilities are critical to our growth. Our efforts to monitor, develop, modify and implement stringent testing and manufacturing processes for our products may not be sufficient. If any flaw in the design, production, assembly or testing of our or our customers’ products were to occur or if our, or our customers’, products were believed to be unsafe, it could result in significant delays in product shipments by, or cancellation of orders or, substantial penalties from, our customers and their customers, substantial refund, recall, repair or replacement costs, an increased return rate for our products, potential damage to our reputation, or potential lawsuits which could prove to be time consuming and costly. Recent pronouncements by the World Health Organization listing mobile phone use as possibly carcinogenic may affect our customers’ sales and in turn affect our sales to our customers. Because we normally provide a warranty for our products, a significant claim for damages related to a breach of warranty could materially affect our financial results.

Problems with manufacturing yields and/or our inability to ramp up production could impair our ability to meet customer demand for our products.

We could experience low manufacturing yields due to, among other things, design errors, manufacturing failures in new or existing products, the inexperience of new employees, component defects, or the learning curve experienced during the initial and ramp up stages of new product introduction. If we cannot achieve expected yields in the manufacture of our products, this could result in higher operating costs, which could result in higher per unit costs, reduced product availability and may be subject to substantial penalties by our customers. Reduced yields or an inability to successfully ramp up products can significantly harm our gross margins, resulting in lower profitability or even losses. In addition, if we were unable to ramp up our production in order to meet customer demand, whether due to yield or other issues, it would impair our ability to meet customer demand for our products, and our net sales and profitability would be negatively affected.

We must develop and adopt new technology and manufacture new products and product features in order to remain competitive, and we may not be able to do so successfully.

Our long-term strategy relies in part on timely adopting, developing and manufacturing technological advances and new products and product features to meet our customers’ needs, including advanced technologies such as high density

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interconnect. However, any new technology and products adopted or developed by us may not be selected by existing or potential customers. Our customers could decide to switch to alternative technologies or materials, adopt new or competing industry standards with which our products are incompatible or fail to adopt standards with which our products are compatible. If we choose to focus on new technology or a standard that is ultimately not accepted by the industry and/or does not become the industry standard, we may be unable to sell those products. If we are unable to obtain customer qualifications for new products or product features, cannot qualify our products for high-volume production quantities or do not execute our operational and strategic plans for new products or advanced technologies in a timely manner, our net sales may decrease. In addition, we may incur higher manufacturing costs in connection with new technology, materials, products or product features, as we may be required to replace, modify, design, build and install equipment, all of which would require additional capital expenditures.

We must continue to be able to procure raw materials and components on commercially reasonable terms to manufacture our products profitably.

Generally we do not maintain a large surplus stock of raw materials or components for our products because the specific assemblies are uniquely applicable to the products we produce for our customers; therefore, we rely on third-party suppliers to provide these raw materials and components in a timely fashion and on commercially reasonable terms. In addition, we are often required by our customers to seek components from a limited number of suppliers that have been pre-qualified by the customer and, from time to time we have experienced shortages of the components and raw materials used in the fabrication of our products. For example, in recent quarters we have experienced shortages in flexible printed circuit materials and have experienced component shortages, which resulted in delayed shipments to customers. We expect that these delays are likely to occur in the current or future periods for a variety of reasons, including but not limited to, the recent disasters in Japan. Furthermore, the supply of certain precious metals required for our products is limited, and our suppliers could lose their export or import licenses on materials we require, any of which could limit or halt our ability to manufacture our products. We may not be successful in managing any shortage of raw materials or components that we may experience in the future, which could adversely affect our relationships with our customers and result in a decrease in our net sales. Component shortages could also increase our cost of goods sold because we may be required to pay higher prices for components in short supply. In addition, suppliers could go out of business, discontinue the supply of key materials, or consider us too small of a customer to sell to directly, and could require us to buy through distributors, increasing the cost of such components to us.

Our manufacturing and shipping costs may also be impacted by fluctuations in the cost of oil and gas. Any fluctuations in the supply or prices of these commodities could have an adverse effect on our profit margins and financial condition.

If we are unable to attract or retain personnel necessary to operate our business, our ability to develop and market our products successfully could be harmed.

We believe that our success is highly dependent on our current executive officers and management team. We do not have an employment contract with Reza Meshgin, our president and chief executive officer, or any of our other key personnel, and their knowledge of our business and industry would be extremely difficult to replace. The loss of any key employee or the inability to attract or retain qualified personnel, including engineers, sales and marketing personnel, management or finance personnel could delay the development and introduction of our products, harm our reputation or otherwise damage our business.

Furthermore, we have experienced very high employee turnover in our facilities in China, and are experiencing increased difficulty in recruiting employees for these facilities. In addition, we are noting the signs of wage inflation, labor unrest and increased unionization in China and expect these to be ongoing trends for the foreseeable future, which could cause employee issues, including work stoppages, excessive wage increases and the formation of labor unions, at our China facilities. A large number of our employees work in our facilities in China, and our costs associated with hiring and retaining these employees have increased over the past several years. The high turnover rate, increasing wages, our difficulty in recruiting and retaining qualified employees and the other labor trends we are noting in China have resulted in an increase in our employee expenses and a continuation of any of these trends could result in even higher costs or production disruptions or delays, resulting in order cancellation, imposition of customer penalties if we were unable to timely deliver product or a negative impact on net sales and profits for us.

Our manufacturing capacity may be interrupted, limited or delayed if we cannot maintain sufficient sources of electricity in China.

The flexible printed circuit fabrication process requires a stable source of electricity. As our production capabilities increase in China and our business grows, our requirements for a stable source of electricity in China will grow substantially.

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We have experienced a lack of sufficient electricity supply and expect to continue to experience insufficient power supplies from time to time, especially during the warmer summer months in China. In addition, China has recently instituted energy conservation regulations which ration the amount of electricity that may be used by enterprises such as ours. Although we have purchased several generators, such generators do not produce sufficient electricity supply to run our manufacturing facilities and they are costly to operate. Power interruptions, electricity shortages, the cost of diesel fuel to run our back-up generators or government intervention, particularly in the form of rationing, are factors that could restrict our access to electricity at our Chinese manufacturing facilities, and affect our ability to manufacture and related costs. Any such shortages could result in delays in our shipments to our customers and, potentially, the loss of customer orders and penalties from such customers for the delay.

Our global operations expose us to additional risk and uncertainties.

We have operations in a number of countries, including the United States, China, the United Kingdom and Singapore. Our global operations may be subject to risks that may limit our ability to operate our business. We manufacture the bulk of our products in China and sell our products globally, which exposes us to a number of risks that can arise from international trade transactions, local business practices and cultural considerations, including:

• political unrest, terrorism and economic or financial instability;

• restrictions on our ability to repatriate earnings;

• unexpected changes in regulatory requirements and uncertainty related to developing legal and regulatory systems related to economic and business activities, real property ownership and application of contract rights;

• nationalization programs that may be implemented by foreign governments;

• import-export regulations;

• difficulties in enforcing agreements and collecting receivables;

• difficulties in ensuring compliance with the laws and regulations of multiple jurisdictions;

• difficulties in ensuring that health, safety, environmental and other working conditions are properly implemented and/or maintained by the local office;

• changes in labor practices, including wage inflation, extremely high increases in the minimum wage, labor unrest and unionization policies;

• limited intellectual property protection;

• longer payment cycles by international customers;

• currency exchange fluctuations;

• inadequate local infrastructure and disruptions of service from utilities or telecommunications providers, including electricity shortages;

• transportation delays and difficulties in managing international distribution channels;

• difficulties in staffing foreign subsidiaries and in managing an expatriate workforce;

• potentially adverse tax consequences;

• differing employment practices and labor issues;

• the occurrence of natural disasters, such as earthquakes, or other acts of force majeure; and

• public health emergencies such as SARS, avian flu and Swine flu.

We also face risks associated with currency exchange and convertibility, inflation and repatriation of earnings as a result of our foreign operations. In some countries, economic, monetary and regulatory factors could affect our ability to convert funds to U.S. dollars or move funds from accounts in these countries. We are also vulnerable to appreciation or depreciation of foreign currencies against the U.S. dollar. Although we have significant operations in Asia, a substantial portion of transactions are denominated in U.S. dollars, including approximately 98% of the total shipments made to foreign manufacturers during the fiscal year 2010. The balance of our net sales is denominated in Chinese Renminbi (“RMB”). As a result, as appreciation against the U.S. dollar increases, it will result in an increase in the cost of our business expenses in China. Further, downward fluctuations in the value of foreign currencies relative to the U.S. dollar may make our products less price competitive than local solutions. From time to time, we may engage in currency hedging activities, but such activities may not be able to limit the risks of currency fluctuations.

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In addition, our activities in China are subject to administrative review and approval by various national and local agencies of China’s government. Given the changes occurring in China’s legal and regulatory structure, we may not be able to secure required governmental approval for our activities or facilities or the government may not apply real property or contract rights in the same manner as one may expect in other jurisdictions. For example, in 2007 we were informed that one of our facilities in China no longer meets the current fire department regulations. If we were required to take corrective action, it could adversely affect our ability to maintain or expand our operations at that facility and/or increase our costs. In addition, certain of our insurance policies may be deemed to be ineffective without a current fire certificate.

Recently, the earthquake, tsunami and subsequent problems affecting nuclear power plants in Japan have dramatically impacted Japan’s manufacturing capacity. The ultimate effect of these issues is still uncertain. Japanese industry supplies a significant portion of certain items essential to the flexible circuit board manufacturing process and may be adversely affected by these issues. As a result, our ability to produce and deliver products to our customers could be adversely affected. Even if supply is not interrupted or delayed, shortages of key items may result in price increases, which our suppliers may seek to pass on to us. This could also affect our profitability. Our customers outside of Japan may be unable to produce finished products as a result of Japanese-related supply chain disruptions. Our customers might then cancel orders for our products, which could materially affect our revenues and profitability.

We are in the process of increasing our manufacturing capacity, and we may have difficulty managing these changes.

We are engaged in a number of manufacturing expansion projects, including new manufacturing facilities in both Suzhou and Chengdu, China. In addition, we have been engaged in an international restructuring effort to transition various business functions to our offices in Singapore, in order to better align these activities with our international operations and to transition certain production and process research and development to China in continuation of our cost reduction efforts. These efforts require significant investment by us, and have in the past and could continue to result in increased expenses and inefficiencies and reduced gross margins.

Our management team may have difficulty managing our manufacturing expansion and transition projects or otherwise managing any growth in our business that we may experience. Risks associated with managing expansion and growth may include those related to:

• managing multiple, concurrent major manufacturing expansion projects;

• hiring and retaining employees, particularly in China;

• accurately predicting any increases or decreases in demand for our products and managing our manufacturing capacity appropriately;

• under-utilized capacity, particularly during the start-up phase of a new manufacturing facility and the effects on our gross margin of under-utilization;

• managing increased employment costs and scrap rates often associated with periods of growth;

• implementing, integrating and improving operational and financial systems, procedures and controls, including our computer systems;

• construction delays, equipment delays or shortages, labor shortages and disputes and production start-up problems;

• cost overruns and charges related to our expansion activities; and

• managing expanding operations in multiple locations and multiple time zones.

Our management team may not be effective in expanding our manufacturing facilities and operations, and our systems, procedures and controls may not be adequate to support such expansion. Any inability to manage our growth may harm our profitability and growth.

If we encounter problems during the expansion and continuing expanded use of our operation management and information systems, we could experience a disruption of our operations and unanticipated increases in our costs.

We are in the process of expanding our information systems for certain of our China facilities. Any problems encountered in the expansion of these systems and continued use and reliance on such systems could result in material adverse consequences, including disruption of operations, loss of information and unanticipated increases in costs.

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WBL Corporation Limited beneficially owns approximately 61% of our outstanding common stock and is able to exert influence over us and our major corporate decisions.

WBL Corporation Limited, together with its affiliates and subsidiaries (“WBL”) beneficially owns approximately 61% of our outstanding common stock, and we expect to be a principal subsidiary of WBL for the foreseeable future. As a result of this ownership interest and the resulting influence over the composition of our board of directors, WBL has influence over our management, operations and potential significant corporate actions. For example, so long as WBL continues to control more than a majority of our outstanding common stock, it will have the ability to control who is elected to our board of directors each year. In addition, for so long as WBL effectively owns at least one-third of our voting stock, it has the ability, through a stockholders’ agreement with us, to approve the appointment of any new chief executive officer or the issuance of securities that would reduce WBL’s effective ownership of us to a level that is below a majority of our outstanding shares of common stock, as determined on a fully diluted basis. As a result, WBL could preclude us from engaging in an acquisition or other strategic opportunity that we may want to pursue if such acquisition or opportunity required the issuance of our common stock. This concentration of ownership may also discourage, delay or prevent a change of control of our company, which could deprive our other stockholders of an opportunity to receive a premium for their stock as part of a sale of our company, could harm the market price of our common stock and could impede the growth of our company. WBL could also sell a controlling interest in us to a third party, including a participant in our industry, or buy additional shares of our stock.

WBL and its designees on our board of directors may have interests that conflict with, or are different from, the interests of our other stockholders. These conflicts of interest could include potential competitive business activities, corporate opportunities, indemnity arrangements, sales or distributions by WBL of our common stock and the exercise by WBL of its ability to influence our management and affairs. In general, our certificate of incorporation does not contain any provision that is designed to facilitate resolution of actual or potential conflicts of interest. If any conflict of interest is not resolved in a manner favorable to our stockholders, our stockholders’ interests may be substantially harmed.

WBL is currently unable to vote its shares on specified matters that require stockholder approval without obtaining its own stockholders’ and regulatory approval and it is possible that WBL’s stockholders or the relevant regulators may not approve the proposed corporate action.

WBL’s ordinary shares are listed on the Singapore Securities Exchange Trading Limited (the “Singapore Exchange”). Under the rules of the Singapore Exchange, to the extent that we constitute a principal subsidiary of WBL as defined by the rules of the Singapore Exchange at any time that we submit a matter for the approval of our stockholders, WBL may be required to obtain the approval of its own stockholders for such action before it can vote its shares with respect to our proposal or dispose of our shares of common stock. Examples of corporate actions we may seek to take that may require WBL to obtain its stockholders’ approval include an amendment of our certificate of incorporation, a sale of all or substantially all of our assets, a merger or reorganization transaction, and certain issuances of our capital stock.

To obtain stockholder approval, WBL must prepare a circular describing the proposal, obtain approval from the Singapore Exchange and send the circular to its stockholders, which may take several weeks or longer. In addition, WBL is required under its corporate rules to give its stockholders advance notice of the meeting. Consequently, if we need to obtain the approval of WBL at a time in which we qualify as a principal subsidiary (including this year), the process of seeking WBL’s stockholder approval may delay our proposed action and it is possible that WBL’s stockholders may not approve our proposed corporate action. It is also possible that we might not be able to establish a quorum at our stockholder meeting if WBL was unable to vote at the meeting as a result of the Singapore Exchange rules. The rules of the Singapore Exchange that govern WBL are subject to revision from time to time, and policy considerations may affect rule interpretation and application. It is possible that any change to or interpretation of existing or future rules may be more restrictive and complex than the existing rules and interpretations.

Our business requires significant investments in capital equipment, facilities and technological improvements, and we may not be able to obtain sufficient funds to make such capital expenditures.

To remain competitive we must continue to make significant investments in capital equipment, facilities and technological improvements. We expect that substantial capital will be required to expand our manufacturing capacity and fund working capital requirements for our anticipated growth. In addition, we expect that new technology requirements may increase the capital intensity of our business. We may need to raise additional funds through further debt or equity financings in order to fund our anticipated growth and capital expenditures, and we may not be able to raise additional capital on reasonable terms, or at all, particularly given the current uncertainty in global credit markets. If we are unable to obtain sufficient capital in the future, we may have to curtail our capital expenditures. Any curtailment of our capital expenditures could result in a reduction in net sales, reduced quality of our products, increased manufacturing costs for our products, harm to our reputation, reduced manufacturing efficiencies or other harm to our business.

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In addition, WBL’s approval is required for the issuance of securities that would reduce its effective ownership of us to below a majority of the outstanding shares of our common stock as determined on a fully diluted basis. If WBL’s approval is required for a proposed financing, it is possible that it may not approve the financing and we may not be able to complete the transaction, which could make it more difficult to obtain sufficient funds to operate and expand our business.

The global credit market crisis and economic weakness may adversely affect our earnings, liquidity and financial condition.

In recent years, global financial and credit markets have been, and continue to be, unstable and unpredictable. Worldwide economic conditions have been weak. The instability of the markets and weakness of the economy could affect the demand for our customers’ products, the amount, timing and stability of their orders to us, the financial strength of our customers and suppliers, their ability or willingness to do business with us, our willingness to do business with them, and/or our suppliers’ and customers’ ability to fulfill their obligations to us. These factors could adversely affect our operations, earnings and financial condition.

Tax positions we have taken may be challenged and we are subject to the risk of changing income tax rates and laws.

From time to time, we may be subject to various types of tax audits, during which tax positions we have taken may be challenged and overturned. If this were to occur, our tax rates could significantly increase and we may be required to pay significant back taxes, interests and/or penalties. In addition, a change in tax laws, treaties or regulations, or their interpretation, of any country in which we operate could result in a higher tax rate. For example, in February 2011, the United States Department of the Treasury issued a high-level outline of proposed modifications to international tax laws for fiscal year 2012. If any of these, or similar, proposals are passed, our statements of financial position and results of operations could be negatively impacted.

In addition, a number of countries in which we are located allow for tax holidays or provide other tax incentives to attract and retain business. For example, we currently enjoy tax incentives for our facility in Singapore. However, any tax holiday we have could be challenged, modified or even eliminated by taxing authorities or changes in law. In addition, the tax laws and rates in certain jurisdictions in which we operate (China, for example) can change with little or no notice, and any such change may even apply retroactively. Any of such changes could adversely affect our effective tax rate.

If we fail to secure or protect our intellectual property rights, competitors may be able to use our technologies, which could weaken our competitive position and harm our business.

We rely primarily on trade secrets and confidentiality procedures relating to our manufacturing processes to protect our proprietary rights. Despite our efforts, these measures can only provide limited protection. Unauthorized third parties may try to copy or reverse engineer portions of our products or otherwise obtain and use our intellectual property. If we fail to protect our proprietary rights adequately, our competitors could offer similar products using processes or technologies developed by us, potentially harming our competitive position. In addition, other parties may independently develop similar or competing technologies.

We also rely on patent protection for some of our intellectual property. Our patents may be expensive to obtain and there is no guarantee that either our current or future patents will provide us with any competitive advantages. A third party may challenge the validity of our patents, or circumvent our patents by developing competing products based on technology that does not infringe our patents. Further, patent protection is not available at all in certain countries and some countries that do allow registration of patents do not provide meaningful redress for patent violations. As a result, protecting intellectual property in those countries is difficult, and competitors could sell products in those countries that have functions and features that would otherwise infringe on our intellectual property. If we fail to protect our intellectual property rights adequately, our competitors may gain access to our technology and our business may be harmed.

We may be sued by third parties for alleged infringement of their proprietary rights.

From time to time, we have received, and expect to continue to receive, notices of claims of infringement, misappropriation or misuse of other parties’ proprietary rights. We could also be subject to claims arising from the allocation of intellectual property rights among us and our customers. Any claims brought against us or our customers, with or without merit, could be time-consuming and expensive to litigate or settle, and could divert management attention away from our business plan. Adverse determinations in litigation could subject us to significant liability and could result in the loss of our proprietary rights. A successful lawsuit against us could also force us to cease selling or require us to redesign any products or marks that incorporate the infringed intellectual property. In addition, we could be required to seek a license from the holder of the intellectual property to use the infringed technology, and it is possible that we may not be able to obtain a license on reasonable terms, or at all. If we fail to develop a non-infringing technology on a timely basis or to license the infringed technology on acceptable terms, our business, financial condition and results of operations could be harmed.

27

Complying with environmental laws and regulations or the environmental policies of our customers may increase our costs and reduce our profitability.

We are subject to a variety of environmental laws and regulations relating to the storage, discharge, handling, emission, generation, manufacture, use and disposal of chemicals, solid and hazardous waste and other toxic and hazardous materials used in the manufacture of flexible printed circuits and component assemblies in our operations in the United States, Europe and Asia. In addition, certain of our customers have, or may in the future have, environmental policies with which we are required to comply that are more stringent than applicable laws and regulations and certain provisions of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act may soon require us to report on “conflict metals” used in our products and the due diligence plan we put in place to track whether such metals originate from the Democratic Republic of Congo. A significant portion of our manufacturing operations are located in China, where we are subject to constantly evolving environmental regulation. The costs of complying with any change in such regulations or customer policies and the costs of remedying potential violations or resolving enforcement actions that might be initiated by governmental entities could be substantial.

In the event of a violation, we may be required to halt one or more segments of our operations until such violation is cured or we may be fined by a customer. The costs of remedying violations or resolving enforcement actions that might be initiated by governmental authorities could be substantial. Any remediation of environmental contamination would involve substantial expense that could harm our results of operations. In addition, we cannot predict the nature, scope or effect of future regulatory or customer requirements to which our operations may be subject or the manner in which existing or future laws or customer policies will be administered or interpreted. Future regulations may be applied to materials, products or activities that have not been subject to regulation previously. The costs of complying with new or more stringent regulations or policies could be significant.

Potential future acquisitions or strategic partnerships could be difficult to integrate, divert the attention of key management personnel, disrupt our business, dilute stockholder value and adversely affect our financial results.

As part of our business strategy, we intend to continue to consider acquisitions of, or partnerships with, companies, technologies and products that we feel could enhance our capabilities, complement our current products or expand the breadth of our markets or customer base. We have limited experience in acquiring or partnering with other businesses and technologies. Potential and completed acquisitions and strategic partnerships involve numerous risks, including:

• difficulties in integrating operations, technologies, accounting and personnel;

• problems maintaining uniform standards, procedures, controls and policies;

• difficulties in supporting and transitioning customers of our acquired companies;

• diversion of financial and management resources from existing operations;

• risks associated with entering new markets in which we have no or limited prior experience;

• potential loss of key employees; and

• inability to generate sufficient revenues to offset acquisition or start-up costs.

Acquisitions also frequently result in the recording of goodwill and other intangible assets which are subject to potential impairments in the future that could harm our financial results. In addition, if we finance acquisitions by issuing convertible debt or equity securities, our existing stockholders may be diluted, which could affect the market price of our stock. As a result, if we fail to properly evaluate acquisitions or partnerships, we may not achieve the anticipated benefits of any such acquisitions or partnerships, and we may incur costs in excess of what we anticipate.

We face potential risks associated with loss, theft or damage of our property or property of our customers.

Some of our customers have entrusted us with proprietary equipment or intellectual property to be used in the design, manufacture and testing of the products we make for them. In some instances, we face potentially millions of dollars in financial exposure to those customers if such equipment or intellectual property is lost, damaged or stolen. Although we take precautions against such loss, theft or damage and we may insure against a portion of these risks, such insurance is expensive, may not be applicable to any loss we may experience and, even if applicable, may not be sufficient to cover any such loss. Further, deductibles for such insurance may be substantial and may adversely affect our operations if we were to experience a loss, even if insured.

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Litigation may distract us from operating our business.

Litigation that may be brought by or against us could cause us to incur significant expenditures and distract our management from the operations and conduct of our business. Furthermore, there can be no assurance that we would prevail in such litigation or resolve such litigation on terms favorable to us, which may adversely affect our operations.

The trading price of our common stock is volatile.

The trading prices of the securities of technology companies, including the trading price of our common stock, have historically been highly volatile. During the 12 month period from July 1, 2010 through June 30, 2011, our common stock price closed between $19.70 and $29.88 per share. Factors that could affect the trading price of our common stock include, but are not limited to:

• fluctuations in our financial results;

• the limited size of our public float;

• announcements of technological innovations or events affecting companies in our industry;

• changes in the estimates of our financial results;

• changes in the recommendations of any securities analysts that elect to follow our common stock; and

• market conditions in our industry, the industries of our customers and the economy as a whole.

In addition, although we have approximately 24.1 million shares of common stock outstanding as of June 30, 2011, approximately 14.8 million of those shares are held by WBL. As a result, there is a limited public float in our common stock. If any of our significant stockholders were to decide to sell a substantial portion of its shares the trading price of our common stock could decline.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results.

Effective internal controls are necessary for us to provide reliable financial reports. This effort is made more challenging by our significant overseas operations. If we cannot provide reliable financial reports, our operating results could be misstated, current and potential stockholders could lose confidence in our financial reporting and the trading price of our stock could be negatively affected. There can be no assurance that our internal controls over financial processes and reporting will be effective in the future.

Delaware law and our corporate charter and bylaws contain anti-takeover provisions that could delay or discourage takeover attempts that stockholders may consider favorable.

Provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management including, among other things, provisions providing for a classified board of directors, authorizing the board of directors to issue preferred stock and the elimination of stockholder voting by written consent. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may discourage, delay or prevent certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These provisions in our charter, bylaws and under Delaware law could discourage delay or prevent potential takeover attempts that stockholders may consider favorable.

Because we do not intend to pay dividends, our stockholders will benefit from an investment in our common stock only if our stock price appreciates in value.

We have never declared or paid any cash dividends on our common stock. We currently intend to retain our future earnings, if any, to finance the expansion of our business and do not expect to pay any cash dividends in the foreseeable future. As a result, the success of an investment in our common stock will depend entirely upon any future appreciation in its value. There is no guarantee that our common stock will appreciate in value or even maintain the price at which it was purchased.

Item 6. Exhibits

3.2(1)	Restated Certificate of Incorporation of the Company.
3.4(2)	Amended and Restated Bylaws of the Company.
4.1(1)	Form of Common Stock Certificate.

29

10.1(1)(3)	Form of Indemnification Agreement between the Company and its officers, directors and agents.
10.2(1)(3)	1994 Stock Plan of the Company, as amended.
10.3(4)(3)	2004 Stock Incentive Plan of the Company, as amended and restated.
10.20(5)	Amended and Restated Stockholders Agreement dated October 25, 2005 between Multi-Fineline Electronix, Inc., Wearnes Technology Pte. Ltd, United Wearnes Technology Pte. Ltd., and WBL Corporation Limited.
10.45(6)(3)	Form of Stock Appreciation Rights Agreement.
10.46(6)	Share Purchase Agreement by and among Multi-Fineline Electronix Singapore Pte. Ltd., Pelikon Limited, Multi-Fineline Electronix, Inc., the members of the Company set forth on the signatures pages thereto, and Michael Powell, as the Shareholders’ Representative, dated November 18, 2008.
10.47(7)	Master Development and Supply Agreement by and between Apple Computer, Inc. and Multi-Fineline Electronix, Inc. dated June 22, 2006.
10.51(8)	Loan and Security Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix Singapore Pte. Ltd., and Bank of America, N.A. dated February 12, 2009.
10.56(9)	Amendment No. 1 to Loan and Security Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix Singapore Pte. Ltd., and Bank of America, N.A. dated August 27, 2009.
10.57(10)(3)	Form of Restricted Stock Unit Agreement.
10.60(11)	Line of Credit Agreement between Multi-Fineline Electronix (Suzhou) Co., Ltd., and China Construction Bank, Suzhou Industry Park Sub-Branch dated March 29, 2010.
10.61(11)	Facility Offer Letter between Multi-Fineline Electronix (Suzhou) Co., Ltd., and China Construction Bank, Suzhou Industry Park Sub-Branch dated March 29, 2010.
10.62(11)	Line of Credit Agreement between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd., and China Construction Bank, Suzhou Industry Park Sub-Branch dated March 29, 2010.
10.63(11)	Facility Offer Letter between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd., and China Construction Bank, Suzhou Industry Park Sub-Branch dated March 29, 2010.
10.64(12)	Engineering, Procurement and Construction/Turn Key Project Agreement by and among MFLEX (Chengdu) Co., Ltd., Beijing Shiyuan Xida Construction and Technology Company, and China Electronics Engineering Design Institute, dated April 15, 2010.
10.65(13)	Amendment No. 2 to Loan and Security Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix Singapore Pte. Ltd., and Bank of America, N.A. dated February 15, 2010.
10.66(13)	Amendment No. 3 to Loan and Security Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix Singapore Pte. Ltd., and Bank of America, N.A. dated March 17, 2010.
10.67(14)	Line of General Credit Agreement between MFLEX Suzhou Co., Ltd. And Agricultural Bank of China, Suzhou Wuzhong Sub-branch dated July 31, 2010.
10.68(14)	Facility Offer Letter between MFLEX Suzhou Co., Ltd., and Agricultural Bank of China, Suzhou Wuzhong Sub-branch dated July 31, 2010.
10.69(15)	Amendment No. 4 to Loan and Security Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix Singapore Pte. Ltd., and Bank of America, N.A. dated August 18, 2010.
10.70(16)	Agreement for Sales of Buildings in Stock by and between Wearnes Global (Suzhou) Co., Ltd. and MFLEX Suzhou Co., Ltd. dated January 6, 2011.
10.71(16)	Supplemental Agreement to Agreement for Sales of Buildings in Stock by and between Wearnes Global (Suzhou) Co., Ltd. and MFLEX Suzhou Co., Ltd. dated January 6, 2011.
10.72(16)	Guarantee Letter by Wearnes Global (Suzhou) Co., Ltd. dated January 6, 2011.

30

10.73(16)	Agreement on the Escrow of Transaction Funds for Building Stock (Fund Trusteeship Agreement) by and among Wearnes Global (Suzhou) Co., Ltd., MFLEX Suzhou Co., Ltd. and Wuzhong District Real Estate Transaction Management Center executed January 19, 2011 and dated January 18, 2011.
10.74(17)	Second Supplemental Agreement to Agreement for Sales of Buildings in Stock by and between Wearnes Global (Suzhou) Co., Ltd and MFLEX Suzhou Co., Ltd. dated March 31, 2011.
31.1*	Section 302 Certification by the Company’s chief executive officer.
31.2*	Section 302 Certification by the Company’s principal financial officer.
32.1*	Section 906 Certification by the Company’s chief executive officer and principal financial officer.
101.INS**	XBRL Instance Document
101.SCH**	XBRL Taxonomy Extension Schema Document
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

** Furnished, not filed

⁽¹⁾  Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Registration Statement on Form S-1, as amended (File No. 333-114510) declared effective by the Securities and Exchange Commission (“SEC”), on June 24, 2004.

⁽²⁾  Incorporated by reference to an exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on May 24, 2005.

⁽³⁾  Indicates management contract or compensatory plan.

⁽⁴⁾  Incorporated by reference to exhibit (as Exhibit A) to the Company’s Proxy Statement for its 2011 Annual Meeting of Stockholders on Form DEF 14A filed with the SEC on January 20, 2011.

⁽⁵⁾  Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on October 25, 2005.

⁽⁶⁾  Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2008.

⁽⁷⁾  Incorporated by reference to exhibit (with same exhibit number) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2008. Confidential treatment has been granted for certain portions of this agreement.

⁽⁸⁾  Incorporated by reference to exhibit (with same exhibit number) to the Company’s Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2009. Confidential treatment has been granted for certain portions of this agreement.

⁽⁹⁾  Incorporated by reference to exhibit (with same exhibit number) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2009. Confidential treatment has been granted for certain portions of this agreement.

⁽¹⁰⁾  Incorporated by reference to exhibit (with same exhibit number) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2009.

⁽¹¹⁾  Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Current Report on Form 8-K filed with the SEC on April 1, 2010.

⁽¹²⁾  Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on April 21, 2010.

⁽¹³⁾  Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2010.

⁽¹⁴⁾  Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Quarterly Report on Form 10-Q filed with the SEC for the quarter ended June 30, 2010.

⁽¹⁵⁾  Incorporated by reference to exhibit (with same exhibit number) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2010.

⁽¹⁶⁾  Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Quarterly Report on Form 10-Q filed with the SEC for the quarter ended December 31, 2010.

⁽¹⁷⁾  Incorporated by reference to exhibit (with same exhibit number) to the Company’s Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2011.

31

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Multi-Fineline Electronix, Inc., a Delaware corporation
Date: August 4, 2011	By:	/s/    Thomas Liguori
		Thomas Liguori Chief Financial Officer and Executive Vice-President (Duly Authorized Officer and Principal Financial Officer of the Registrant)

32

EXHIBIT INDEX

3.2(1)	Restated Certificate of Incorporation of the Company.
3.4(2)	Amended and Restated Bylaws of the Company.
4.1(1)	Form of Common Stock Certificate.
10.1(1)(3)	Form of Indemnification Agreement between the Company and its officers, directors and agents.
10.2(1)(3)	1994 Stock Plan of the Company, as amended.
10.3(4)(3)	2004 Stock Incentive Plan of the Company, as amended and restated.
10.20(5)	Amended and Restated Stockholders Agreement dated October 25, 2005 between Multi-Fineline Electronix, Inc., Wearnes Technology Pte. Ltd, United Wearnes Technology Pte. Ltd., and WBL Corporation Limited.
10.45(6)(3)	Form of Stock Appreciation Rights Agreement.
10.46(6)	Share Purchase Agreement by and among Multi-Fineline Electronix Singapore Pte. Ltd., Pelikon Limited, Multi-Fineline Electronix, Inc., the members of the Company set forth on the signatures pages thereto, and Michael Powell, as the Shareholders’ Representative, dated November 18, 2008.
10.47(7)	Master Development and Supply Agreement by and between Apple Computer, Inc. and Multi-Fineline Electronix, Inc. dated June 22, 2006.
10.51(8)	Loan and Security Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix Singapore Pte. Ltd., and Bank of America, N.A. dated February 12, 2009.
10.56(9)	Amendment No. 1 to Loan and Security Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix Singapore Pte. Ltd., and Bank of America, N.A. dated August 27, 2009.
10.57(10)(3)	Form of Restricted Stock Unit Agreement.
10.60(11)	Line of Credit Agreement between Multi-Fineline Electronix (Suzhou) Co., Ltd., and China Construction Bank, Suzhou Industry Park Sub-Branch dated March 29, 2010.
10.61(11)	Facility Offer Letter between Multi-Fineline Electronix (Suzhou) Co., Ltd., and China Construction Bank, Suzhou Industry Park Sub-Branch dated March 29, 2010.
10.62(11)	Line of Credit Agreement between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd., and China Construction Bank, Suzhou Industry Park Sub-Branch dated March 29, 2010.
10.63(11)	Facility Offer Letter between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd., and China Construction Bank, Suzhou Industry Park Sub-Branch dated March 29, 2010.
10.64(12)	Engineering, Procurement and Construction/Turn Key Project Agreement by and among MFLEX (Chengdu) Co., Ltd., Beijing Shiyuan Xida Construction and Technology Company, and China Electronics Engineering Design Institute, dated April 15, 2010.
10.65(13)	Amendment No. 2 to Loan and Security Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix Singapore Pte. Ltd., and Bank of America, N.A. dated February 15, 2010.
10.66(13)	Amendment No. 3 to Loan and Security Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix Singapore Pte. Ltd., and Bank of America, N.A. dated March 17, 2010.
10.67(14)	Line of General Credit Agreement between MFLEX Suzhou Co., Ltd. And Agricultural Bank of China, Suzhou Wuzhong Sub-branch dated July 31, 2010.
10.68(14)	Facility Offer Letter between MFLEX Suzhou Co., Ltd., and Agricultural Bank of China, Suzhou Wuzhong Sub-branch dated July 31, 2010.

33

10.69(15)	Amendment No. 4 to Loan and Security Agreement by and among Multi-Fineline Electronix, Inc., Multi-Fineline Electronix Singapore Pte. Ltd., and Bank of America, N.A. dated August 18, 2010.
10.70(16)	Agreement for Sales of Buildings in Stock by and between Wearnes Global (Suzhou) Co., Ltd. and MFLEX Suzhou Co., Ltd. dated January 6, 2011.
10.71(16)	Supplemental Agreement to Agreement for Sales of Buildings in Stock by and between Wearnes Global (Suzhou) Co., Ltd. and MFLEX Suzhou Co., Ltd. dated January 6, 2011.
10.72(16)	Guarantee Letter by Wearnes Global (Suzhou) Co., Ltd. dated January 6, 2011.
10.73(16)	Agreement on the Escrow of Transaction Funds for Building Stock (Fund Trusteeship Agreement) by and among Wearnes Global (Suzhou) Co., Ltd., MFLEX Suzhou Co., Ltd. and Wuzhong District Real Estate Transaction Management Center executed January 19, 2011 and dated January 18, 2011.
10.74(17)	Second Supplemental Agreement to Agreement for Sales of Buildings in Stock by and between Wearnes Global (Suzhou) Co., Ltd and MFLEX Suzhou Co., Ltd. dated March 31, 2011.
31.1*	Section 302 Certification by the Company’s chief executive officer.
31.2*	Section 302 Certification by the Company’s principal financial officer.
32.1*	Section 906 Certification by the Company’s chief executive officer and principal financial officer.
101.INS**	XBRL Instance Document
101.SCH**	XBRL Taxonomy Extension Schema Document
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

** Furnished, not filed

⁽¹⁾  Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Registration Statement on Form S-1, as amended (File No. 333-114510) declared effective by the Securities and Exchange Commission (“SEC”), on June 24, 2004.

⁽²⁾  Incorporated by reference to an exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on May 24, 2005.

⁽³⁾  Indicates management contract or compensatory plan.

⁽⁴⁾  Incorporated by reference to exhibit (as Exhibit A) to the Company’s Proxy Statement for its 2011 Annual Meeting of Stockholders on Form DEF 14A filed with the SEC on January 20, 2011.

⁽⁵⁾  Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on October 25, 2005.

⁽⁶⁾  Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2008.

⁽⁷⁾  Incorporated by reference to exhibit (with same exhibit number) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2008. Confidential treatment has been granted for certain portions of this agreement.

⁽⁸⁾  Incorporated by reference to exhibit (with same exhibit number) to the Company’s Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2009. Confidential treatment has been granted for certain portions of this agreement.

⁽⁹⁾  Incorporated by reference to exhibit (with same exhibit number) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2009. Confidential treatment has been granted for certain portions of this agreement.

⁽¹⁰⁾  Incorporated by reference to exhibit (with same exhibit number) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2009.

⁽¹¹⁾  Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Current Report on Form 8-K filed with the SEC on April 1, 2010.

⁽¹²⁾  Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on April 21, 2010.

⁽¹³⁾  Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2010.

⁽¹⁴⁾  Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Quarterly Report on Form 10-Q filed with the SEC for the quarter ended June 30, 2010.

⁽¹⁵⁾  Incorporated by reference to exhibit (with same exhibit number) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2010.

⁽¹⁶⁾  Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Quarterly Report on Form 10-Q filed with the SEC for the quarter ended December 31, 2010.

⁽¹⁷⁾  Incorporated by reference to exhibit (with same exhibit number) to the Company’s Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2011.

34

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Reza Meshgin, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Multi-Fineline Electronix, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 4, 2011	By:	/s/    Reza Meshgin
		Reza Meshgin Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Thomas Liguori, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Multi-Fineline Electronix, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 4, 2011	By:	/s/    Thomas Liguori
		Thomas Liguori Chief Financial Officer and Executive Vice-President

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q (the “Report”) of Multi-Fineline Electronix, Inc. (the “Company”) for the period ended June 30, 2011, as filed with the Securities and Exchange Commission on the date hereof, Reza Meshgin, as Chief Executive Officer of the Company, and Thomas Liguori, as Chief Financial Officer of the Company, each hereby certifies, to the best of his respective knowledge, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 4, 2011	/s/    Reza Meshgin	/s/    Thomas Liguori
	Chief Executive Officer	Chief Financial Officer and Executive Vice-President

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data	Jun. 30, 2011	Sep. 30, 2010
Condensed Consolidated Balance Sheets
Accounts receivable, allowances	$ 4,028	$ 2,354
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	24,096,571	23,916,665
Common stock, shares outstanding	24,096,571	23,916,665

XML



Condensed Consolidated Statements Of Operations (USD $) In Thousands, except Share data	3 Months Ended		9 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Condensed Consolidated Statements Of Operations
Net sales	$ 191,838	$ 181,049	$ 640,062	$ 564,623
Cost of sales	168,525	158,808	554,520	483,606
Gross profit	23,313	22,241	85,542	81,017
Operating expenses:
Research and development	2,378	4,442	7,960	10,738
Sales and marketing	5,512	5,088	19,259	17,627
General and administrative	3,800	4,834	13,468	15,610
Impairment and restructuring	999	3,328	999	5,265
Total operating expenses	12,689	17,692	41,686	49,240
Operating income	10,624	4,549	43,856	31,777
Other income (expense), net:
Interest income	213	168	651	370
Interest expense	(123)	(121)	(348)	(667)
Other income (expense), net	261	242	342	739
Income before income taxes	10,975	4,838	44,501	32,219
Provision for income taxes	(2,157)	(2,456)	(9,005)	(8,582)
Net income	8,818	2,382	35,496	23,637
Net income per share:
Basic	$ 0.37	$ 0.09	$ 1.48	$ 0.93
Diluted	$ 0.36	$ 0.09	$ 1.46	$ 0.92
Shares used in computing net income per share:
Basic	24,092,048	25,417,674	24,004,063	25,379,381
Diluted	24,331,731	25,762,862	24,325,067	25,794,568
Other comprehensive income, net of tax:
Net income	8,818	2,382	35,496	23,637
Foreign currency translation adjustment	3,573	1,174	9,025	1,256
Total comprehensive income	$ 12,391	$ 3,556	$ 44,521	$ 24,893

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Document And Entity Information	9 Months Ended
	Jun. 30, 2011	Jul. 31, 2011
Document And Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2011
Entity Central Index Key	0000830916
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3
Entity Registrant Name	MULTI FINELINE ELECTRONIX INC
Current Fiscal Year End Date	--09-30
Entity Filer Category	Accelerated Filer
Trading Symbol	MFLX
Entity Common Stock, Shares Outstanding		24,096,571

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Income Taxes

9 Months Ended

Jun. 30, 2011

Income Taxes

Income Taxes

7. Income Taxes

As of June 30, 2011, the liability for income taxes associated with uncertain tax positions increased to $14,149 from $11,372 as of September 30, 2010. On a net basis, as of June 30, 2011 and September 30, 2010, these liabilities are reduced by $4,818 and $4,723, respectively, from offsetting tax benefits associated with the correlative effects of potential transfer pricing adjustments, state income taxes and timing adjustments. The net amount of $9,331 at June 30, 2011 and $6,649 at September 30, 2010, if recognized, would favorably affect the Company's effective tax rate. The Company anticipates that there will be changes to the unrecognized tax benefit associated with uncertain tax positions due to the expiration of statutes of limitation, payment of tax on amended returns, audit settlements and other changes in reserves. However, due to the uncertainty regarding the timing of these events, a current estimate of the range of changes that may occur within the next twelve months cannot be made.

The Company currently enjoys tax incentives for certain of its Asian operations. Certain Asian operations are subject to taxes at a rate of 10% of their profits. For the nine months ended June 30, 2011, the Company realized tax savings for these operations. However, the tax incentive may be challenged, modified or eliminated by taxing authorities or changes in law.

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Lines Of Credit

9 Months Ended

Jun. 30, 2011

Lines Of Credit

Lines Of Credit

3. Lines of Credit

In July 2010, MFC entered into a credit line agreement with Agricultural Bank of China, Suzhou Wuzhong Sub-branch ("ABC"), which provides for a borrowing facility for 200,000 Chinese renminbi ("RMB") ($30,904 at June 30, 2011). The line of credit will mature in July 2013.

In March 2010, MFC1 and MFC2 entered into credit line agreements with China Construction Bank, Suzhou Industry Park Sub-Branch ("CCB"), which provide for two borrowing facilities, for 150,000 RMB each ($23,178 each at June 30, 2011). The lines of credit will mature in March 2013.

In February 2009, the Company and MFLEX Singapore entered into a Loan and Security Agreement with Bank of America, N.A., as a lender and agent ("BOA"), for a senior revolving credit facility in an amount up to $30,000, which may be increased to $60,000 at the Company's discretion upon satisfaction of certain additional requirements. The line of credit will mature in February 2012.

A summary of the lines of credit is as follows:

	Amounts Available at				Amounts Outstanding at
	June 30, 2011		September 30, 2010		June 30, 2011		September 30, 2010
Line of credit (ABC)	$	30,904	$	29,846	$	—	$	—
Line of credit (CCB)		46,356		44,768		—		—
Line of credit (BOA)		20,526		30,000		—		—
	$	97,786	$	104,614	$	—	$	—

As of June 30, 2011, the Company was in compliance with all covenants under the lines of credit.

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Derivative Financial Instruments

9 Months Ended

Jun. 30, 2011

Derivative Financial Instruments

Derivative Financial Instruments

9. Derivative Financial Instruments

Foreign Currency Forward Contracts

The Company transacts business in various foreign countries and is therefore exposed to gains and losses resulting from fluctuations in foreign currency exchange rates relating to purchases, obligations, and monetary assets and liabilities that are denominated in currencies other than the Company's reporting currency. The Company has established foreign currency risk management programs to protect against volatility in the value of non-U.S. dollar denominated monetary assets and liabilities, and of future cash flows caused by changes in foreign currency exchange rates. As a result, the Company enters into certain foreign currency forward contracts to hedge its aforementioned currency exposures.

The Company accounts for all of its derivative instruments in accordance with the relevant FASB authoritative accounting guidance for derivatives and hedges, which requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the condensed consolidated balance sheets. As of June 30, 2011, the aggregate notional amount of the Company's outstanding foreign currency non-deliverable forward contracts ("NDF Contracts") is summarized below:

Currency	Buy/Sell	Foreign Currency Amount		Notional Contract Value in USD
Foreign currency non-hedge derivatives:
RMB	Buy	¥	64,330	$	10,000

The changes in fair value of its derivative instruments are recognized in earnings during the period of change as other income (expense), net in the condensed consolidated statements of operations. The Company recognized realized losses of $11 during the three and nine months ended June 30, 2011 and $0 during the three and nine months ended June 30, 2010, respectively, related to settlement of NDF Contracts. The Company also recognized unrealized losses of $50 during the three and nine months ended June 30, 2011 and $0 during the three and nine months ended June 30, 2010, respectively, related to outstanding NDF Contracts. See Note 10 for further information on fair value measurements.

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Fair Value Measurements

9 Months Ended

Jun. 30, 2011

Fair Value Measurements

Fair Value Measurements

10. Fair Value Measurements

Per FASB authoritative guidance, the Company classifies and discloses the fair value of assets and liabilities in one of the following three categories:

Level 1: quoted market prices in active markets for identical assets and liabilities

Level 2: observable market based inputs or unobservable inputs that are corroborated by market data

Level 3: unobservable inputs that are not corroborated by market data

Derivative Financial Instruments

For recognition purposes, on a recurring basis, the Company's assets and liabilities related to derivative financial instruments were measured at fair value as of June 30, 2011. The fair value was determined based on Level 2 inputs, which consist of observable market-based inputs of foreign currency spot and forward rates quoted by major financial institutions. The Company's derivative financial instruments measured at fair value on a recurring basis subject to the disclosure requirements as defined under the FASB authoritative accounting guidance were as follows:

	Fair Value Measurements of Assets and Liabilities on a Recurring Basis as of June 30, 2011
	Level 1		Level 2			Level 3
Accrued liabilities:
NDF contracts		—	$	(50	)		—
	$	—	$	(50	)	$	—

There were no assets and liabilities measured at fair value on a recurring basis as of September 30, 2010.

Long-lived Assets

For recognition purposes, on a non-recurring basis, the Company measured certain of its long-lived assets at fair value as of June 30, 2011. The fair value was determined based on Level 2 inputs, which consist of unobservable inputs that are corroborated by market data, whereby reflecting the price that would be received for these assets in their current condition and location. The fair value of the long-lived assets was determined based on a current market value comparison analysis with similar assets in the area. The fair value less costs to sell including broker commissions, legal and title transfer fees and closing costs were incorporated to determine the fair value as of June 30, 2011.

	Fair Value Measurements of Assets and Liabilities on a Non-Recurring Basis as of June 30, 2011
	Level 1		Level 2		Level 3
Assets held for sale:
Long-lived assets		—	$	2,689		—
	$	—	$	2,689	$	—

The long-lived assets had carrying amounts of $3,688, which were written down to their fair value of $2,689, resulting in impairment charges of $999 (of which $242 were costs to sell) included in earnings during the third fiscal quarter of 2011.

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Impairment And Restructuring

9 Months Ended

Jun. 30, 2011

Impairment And Restructuring

Impairment And Restructuring

8. Impairment and Restructuring

Anaheim (Fiscal Year 2010)

In February 2010, the Company committed to close one of its facilities in Anaheim as part of a strategic effort to move more functions, specifically low-volume production and process research and development associated with the Company's flex and flex assembly processes, to Asia. Based on the Company's evaluation of the recoverability of impacted long-lived assets, pre-tax asset impairment charges of $2,117 were recorded during fiscal 2010, including $1,480 of machinery and equipment and $637 of leasehold improvements. The fair value of the long-lived assets was determined based on quoted market prices for similar assets. In addition, a net gain on sale of assets of $578, pre-tax one-time termination benefits charges of $1,213 and other restructuring-related charges of $1,161 were recorded during fiscal 2010. The total amount expected to be incurred in connection with the closure of the facility in Anaheim was $3,913 as of September 30, 2010, all of which was recorded during fiscal 2010.

During the third fiscal quarter of 2011, the Company evaluated a Company-owned building in Anaheim under the "Long-Lived Assets to Be Disposed of by Sale" classification, and determined that the building should be classified as assets held for sale as of June 30, 2011. Based on the Company's evaluation of the recoverability of the impacted long-lived assets, a pre-tax impairment charge of $92 was recorded in the third fiscal quarter of 2011. As of June 30, 2011, the Company recorded $638 as assets held for sale related to the Company-owned building in Anaheim.

Aurora Optical (Fiscal Year 2008)

In the third fiscal quarter of 2011, the Company recorded impairment charges of $907 related to its Arizona facility of Aurora Optical, which was closed during the fourth fiscal quarter of 2008. The related charges were due to further market decline in commercial real estate values in fiscal 2011. As of June 30, 2011, the Company recorded $2,051 as assets held for sale related to the former Aurora Optical land and building.

Restructuring Reserve Activity

The following table reflects the movement activity of the restructuring reserve for the nine months ended June 30, 2011:

	One-Time Termination Benefits			Other			Total
Accrual balance as of September 30, 2010	$	547		$	502		$	1,049
Restructuring charges		—			—			—
Utilization		(524	)		(497	)		(1,021	)
Adjustments		(23	)		7			(16	)
Accrual balance as of June 30, 2011	$	—		$	12		$	12

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Description Of Business

9 Months Ended

Jun. 30, 2011

Description Of Business

Description Of Business

1. Description of Business

Multi-Fineline Electronix, Inc. ("MFLEX" or the "Company") was incorporated in 1984 in the State of California and reincorporated in the State of Delaware in June 2004. The Company is primarily engaged in the engineering, design and manufacture of flexible printed circuit boards along with related component assemblies.

Affiliates and subsidiaries of WBL Corporation Limited (collectively "WBL"), a Singapore company, beneficially owned approximately 61% and 62% of the Company's outstanding common stock as of June 30, 2011 and September 30, 2010, respectively, which provides WBL with control over the outcome of stockholder votes, except with respect to certain related-party transactions.

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Segment Information

9 Months Ended

Jun. 30, 2011

Segment Information

Segment Information

4. Segment information

Based on the evaluation of the Company's internal financial information, management believes that the Company operates in one reportable segment in which it is primarily engaged in the engineering, design and manufacture of flexible circuit boards along with related component assemblies. The Company operates in four geographical areas: United States, China, Singapore and Other (which includes Malaysia and the United Kingdom). Net sales are presented based on the country in which the sales originate, which is where the legal entity is domiciled. The financial results of the Company's geographic segments are presented on a basis consistent with the condensed consolidated financial statements. Segment net sales and assets amounts include intra-company product sales transactions and subsidiary investment amounts, respectively, which are offset in the elimination line.

Financial information by geographic segment is as follows:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2011			2010			2011			2010
Net sales
United States	$	4,980		$	10,718		$	16,985		$	56,582
China		176,566			182,104			577,280			474,476
Singapore		184,916			181,072			619,920			531,755
Other		233			121			374			574
Eliminations		(174,857	)		(192,966	)		(574,497	)		(498,764	)
Total	$	191,838		$	181,049		$	640,062		$	564,623
Operating income (loss)
United States	$	(3,081	)	$	(3,125	)	$	(8,412	)	$	(10,425	)
China		5,498			10,659			13,637			21,045
Singapore		9,246			2,074			41,754			32,158
Other		(783	)		(4,536	)		(2,586	)		(10,505	)
Eliminations		(256	)		(523	)		(537	)		(496	)
Total	$	10,624		$	4,549		$	43,856		$	31,777
Depreciation and amortization
United States	$	934		$	985		$	2,733		$	3,496
China		10,688			8,830			30,750			28,707
Singapore		24			17			72			37
Other		48			687			162			2,019
Total	$	11,694		$	10,519		$	33,717		$	34,259
							June 30, 2011			September 30, 2010
Total assets
United States							$	170,110		$	192,559
China								335,510			285,945
Singapore								272,717			268,186
Other								5,228			5,873
Eliminations								(218,024	)		(190,242	)
Total							$	565,541		$	562,321

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Equity Incentive Plans

9 Months Ended

Jun. 30, 2011

Equity Incentive Plans

Equity Incentive Plans

5. Equity Incentive Plans

Stock Options

Stock option activity for the nine months ended June 30, 2011 under the Company's 2004 Stock Incentive Plan (the "2004 Plan") is summarized as follows:

	Number of Shares			Weighted- Average Exercise Price		Aggregate Intrinsic Value		Weighted- Average Remaining Contractual Life
Options outstanding at September 30, 2010		328,599		$	11.57
Granted		—			—
Exercised		(89,619	)		13.94
Forfeited		(2,700	)		10.00
Options outstanding and exercisable at June 30, 2011		236,280		$	10.69	$	2,581		3.0
Vested and expected to vest at June 30, 2011		236,280		$	10.69	$	2,581		3.0

No compensation costs were recognized during the three and nine months ended June 30, 2011 and 2010 related to stock options. The aggregate intrinsic value of stock options exercised was $0 and $1,346 during the three and nine months ended June 30, 2011 and was $887 and $3,218 during the three and nine months ended June 30, 2010, respectively. No unearned compensation existed as of June 30, 2011 related to non-vested stock options.

Service and Performance-Based Restricted Stock Units

During the three and nine months ended June 30, 2011, the Company granted service-based restricted stock units ("RSU" or "RSUs") equal to 5,665 and 212,327 shares, respectively, of the Company's common stock. These grants were made under the 2004 Plan to certain employees (including executive officers) and directors at no cost to such individual. Each RSU represents one hypothetical share of the Company's common stock, without voting or dividend rights. The RSUs granted to employees vest over a period of three years with one-third vesting on each of the anniversary dates of the grant date. Unearned compensation related to the RSUs is determined based on the fair value of the Company's common stock on the date of grant and is amortized to expense over the vesting period using the straight-line method.

On November 15, 2010, the Company's board of directors (the "Board") or a committee thereof (in either event, the "Administrator") approved the grant of 94,879 performance-based RSUs (the "November 2010 Awards"). The November 2010 Awards vest upon the achievement of defined performance and market objectives pertaining to each grant, with vesting to occur on or about November 30, 2013. Two-thirds of the November 2010 Awards contained performance conditions whereby the Company recorded share-based compensation cost based on the grant-date fair value and the probability that the performance metrics will be achieved. At the end of each reporting period, the Company evaluates the probability that the performance-based RSUs will vest. If the Company determines that the vesting of any of the outstanding performance-based RSUs is not probable, the compensation expense related to those performance-based RSUs is reversed in the period in which this determination is made.

One-third of the November 2010 Awards contained both market and performance conditions, whereby the market condition was measured by determining the Company's total shareholder return ("TSR") for the three year period beginning fiscal 2011 through fiscal 2013 versus the TSR of the Russell 2000 Index for the same period. An award with a market condition is accounted for and measured differently than an award that has a performance or service condition. The effect of a market condition is reflected in the award's fair value on the grant date (e.g., a discount may be taken when estimating the fair value of an RSU to reflect the market condition). The fair value may be lower than the fair value of an identical award that has only a service or performance condition because those awards will not include a discount on the fair value. All compensation costs for an award that has a market condition will be recognized if the requisite service period is fulfilled, even if the market condition is never satisfied. The estimated per share fair value of the portion of the November 2010 Awards containing both market and performance conditions was $16.47 utilizing the following weighted-average assumptions:

	November 2010 Awards			Russell 2000 Index Benchmark Inputs
Expected stock return/discount rate1		0.64	%		0.64	%
Dividend yield		0.00	%		0.00	%
Volatility2		65.00	%		25.00	%
Test start date3		9/30/2010			9/30/2010
Common share price3	$	21.99		$	676.14
Expected vesting period (in years)		3.00			N/A

¹  The expected stock return/discount rate was based on the yield to maturity of short-term government bonds over the expected term as of the grant dates.

²  Volatilities are selected as of fiscal year end dates for the Company given the vesting provisions are based on the TSR over a fiscal period.

³  The common stock price input at the grant date was based on the closing price for the Company's common stock and the Russell 2000 Index as of September 30, 2010, which was $21.99 and $676.14, respectively. The Company selected the September 30, 2010 prices given that the measurement period for the vesting objective started on September 30, 2010.

During the third fiscal quarter of 2011, the two-thirds of the November 2010 Awards which contained only performance conditions were deemed not probable of meeting such objectives, and as a result, the Company reversed $216 of compensation costs related to these awards.

On November 16, 2009, the Administrator approved the grant of 117,826 performance-based RSUs (the "November 2009 Awards"). The November 2009 Awards vest upon the achievement of defined performance objectives pertaining to each grant, with vesting to occur on or about November 30, 2012. During the third fiscal quarter of 2011, the November 2009 Awards were deemed not probable of meeting the defined performance objectives, and as a result, the Company reversed $1,251 of compensation costs related to these awards.

RSU activity for the nine months ended June 30, 2011 under the 2004 Plan is summarized as follows:

	Number of Shares			Weighted- Average Grant- Date Fair Value
Non-vested shares outstanding at September 30, 2010		479,019		$	21.68
Granted		307,206			22.38
Vested		(186,463	)		19.34
Forfeited		(51,953	)		23.37
Non-vested shares outstanding at June 30, 2011		547,809		$	22.71

The Company recognized compensation costs related to RSUs of $(406) and $2,272 during the three and nine months ended June 30, 2011 and $1,246 and $3,693 during the three and nine months ended June 30, 2010, respectively. The weighted-average grant-date fair value of nonvested RSUs granted during the nine months ended June 30, 2011 and 2010 was $22.38 and $25.94, respectively. The weighted-average grant-date fair value of RSUs vested during the nine months ended June 30, 2011 and 2010 was $19.34 and $17.68, respectively. Unearned compensation of $5,982 existed as of June 30, 2011 related to nonvested RSUs, which will be recognized into expense over the weighted-average remaining contractual life of the nonvested RSUs of 1.4 years.

Stock Appreciation Rights

During the nine months ended June 30, 2011, the Administrator approved the grant of stock appreciation rights ("SSAR" or "SSARs") to be settled in Company common stock. These grants were made under the 2004 Plan to certain employees (including executive officers) at no cost to such individual. Each SSAR has a base appreciation amount that is equal to the closing price of a share of the Company's common stock on each applicable grant date as reported on the NASDAQ Global Select Market. The Company's SSARs are treated as equity awards and are measured using the initial compensation element of the award at the time of grant and the expense is recognized over the requisite service period (the vesting period).

On November 15, 2010, the Administrator approved the grant of 125,780 SSARs (the "November 2010 SSARs"). The November 2010 SSARs vest over a period of three years with one-third vesting on each November 15, 2011, 2012 and 2013, and will expire on November 14, 2020. The grant date fair value of the November 2010 SSARs was estimated at $10.22 using the Black-Scholes valuation pricing model assuming a risk-free interest rate of 0.78%, zero expected dividends, expected volatility of 66.81% and an expected term of 3.3 years.

SSARs activity for the nine months ended June 30, 2011 under the 2004 Plan is summarized as follows:

	Number of Shares			Weighted- Average Exercise Price		Aggregate Intrinsic Value		Weighted- Average Remaining Contractual Life
SSARs outstanding at September 30, 2010		295,282		$	21.16
Granted		125,780			22.17
Exercised		—			—
Forfeited		(50,659	)		21.60
SSARs outstanding at June 30, 2011		370,403		$	21.44	$	823		8.48
SSARs expected to vest after June 30, 2011		354,705		$	21.37	$	809		8.47

The Company recognized compensation costs of $192 and $717 during the three and nine months ended June 30, 2011 and $320 and $712 during the three and nine months ended June 30, 2010, respectively, related to SSARs. No SSARs were exercised or were exercisable during the nine months ended June 30, 2011 and 2010. Unearned compensation as of June 30, 2011 was $1,730 related to non-vested SSARs, which will be recognized into expense over a weighted-average period of 1.4 years.

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Share Repurchase Program

9 Months Ended

Jun. 30, 2011

Share Repurchase Program

Share Repurchase Program

6. Share Repurchase Program

On December 5, 2008, the Board approved the establishment of a share repurchase program for up to 2,250,000 shares in the aggregate of the Company's common stock on the open market. This amount represented approximately nine percent of the Company's common stock outstanding as of June 30, 2011. As of December 31, 2010, the Company had completed the repurchase of all shares authorized for repurchase under this program.

It is the Company's intention to buy back, from time to time, enough shares of the Company's stock (pursuant to 10b5-1 stock repurchase plan(s)) to offset the dilution of the shares actually issued pursuant to grants under the 2004 Plan. In accordance with this intention, the Board has provided a committee with the discretion to execute a stock repurchase program providing for the repurchase of up to 1,100,000 shares in the aggregate of the Company's common stock on the open market. The timing, price and volume of repurchases will be based on market conditions, relevant securities laws and other factors. Repurchases of common stock will be made under Rule 10b5-1 plans, which permit common stock to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. To date, the Company has not entered into any such repurchase plan.

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Condensed Consolidated Statements Of Cash Flows (USD $) In Thousands	9 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Cash flows from operating activities
Net income	$ 35,496	$ 23,637
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	33,717	34,259
Provision for doubtful accounts and returns	9,094	3,656
Deferred taxes	(202)	141
Stock-based compensation expense	2,973	4,294
Asset impairments	999	3,475
Loss (gain) on disposal of equipment	233	(289)
Changes in operating assets and liabilities:
Accounts receivable	4,985	11,544
Inventories	5,435	(3,411)
Due to (from) affiliates, net	3,312	(326)
Other current assets	860	(778)
Other assets	(9,313)	(1,364)
Accounts payable	(45,364)	(16,749)
Accrued liabilities	(5,131)	3,869
Income taxes payable	(3,472)	1,185
Other current liabilities		292
Other liabilities	3,513	2,039
Net cash provided by operating activities	37,135	65,474
Cash flows from investing activities
Sales of investments	14,991	6,196
Purchases of investments		(4,996)
Purchases of property and equipment	(53,546)	(39,092)
Proceeds from sale of equipment	601	1,453
Net cash used in investing activities	(37,954)	(36,439)
Cash flows from financing activities
Proceeds from exercise of stock options	1,266	1,969
Repayments of long-term debt		(11,144)
Tax withholdings for net share settlement of equity awards	(1,315)	(1,248)
Repurchase of common stock	(924)	(8,277)
Net cash used in financing activities	(973)	(18,700)
Effect of exchange rate changes on cash	1,925	201
Net increase in cash	133	10,536
Cash and cash equivalents at the beginning of the period	99,875	139,721
Cash and cash equivalents at the end of the period	100,008	150,257
Non-cash investing activities
Purchases of property and equipment	$ 18,084	$ 13,786

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Basis Of Presentation

9 Months Ended

Jun. 30, 2011

Basis Of Presentation

Basis Of Presentation

2. Basis of Presentation

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company has two wholly owned subsidiaries located in China: MFLEX Suzhou Co., Ltd., ("MFC") formerly known as Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. ("MFC2") and into which Multi-Fineline Electronix (Suzhou) Co., Ltd ("MFC1") was merged in fiscal 2010, and MFLEX Chengdu Co., Ltd. ("MFLEX Chengdu"); one located in the Cayman Islands: M-Flex Cayman Islands, Inc. ("MFCI"); one located in Singapore: Multi-Fineline Electronix Singapore Pte. Ltd. ("MFLEX Singapore"); one in Malaysia: Multi-Fineline Electronix Malaysia Sdn. Bhd. ("MFM"); one located in Arizona: Aurora Optical, Inc. ("Aurora Optical"); and one located in Cambridge, England: MFLEX UK Limited, formerly known as Pelikon Limited ("MFE"). All significant intercompany transactions and balances have been eliminated in consolidation.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company's 2010 Annual Report on Form 10-K. The financial information presented in the accompanying statements reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the periods indicated. All such adjustments are of a normal recurring nature. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States.

Fair Value of Financial Instruments

The carrying amounts of certain of the Company's financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value due to their short maturities. Derivative financial instruments are recognized at fair value based on observable market-based inputs of foreign currency spot and forward rates quoted by major financial institutions.

Inventories

Inventories are comprised of the following:

	June 30, 2011		September 30, 2010
Raw materials and supplies	$	22,234	$	32,134
Work-in-progress		18,869		19,855
Finished goods		32,182		24,944
	$	73,285	$	76,933

Property, Plant and Equipment

Property, plant and equipment, net, are comprised of the following:

	June 30, 2011			September 30, 2010
Land	$	3,400		$	3,730
Building		72,590			55,688
Machinery and equipment		264,069			223,518
Computers and capitalized software		12,220			12,106
Leasehold improvements		15,288			16,550
Construction-in-progress		22,520			23,886
	$	390,087		$	335,478
Accumulated depreciation and amortization		(177,765	)		(150,196	)
	$	212,322		$	185,282

Product Warranty Accrual

The Company typically warrants its products for up to 36 months. The standard warranty requires the Company to replace defective products returned to the Company at no cost to the customer. The Company records an estimate for warranty related costs at the time revenue is recognized based on historical amounts incurred for warranty expense and historical return rates. The warranty accrual is included in accrued liabilities in the accompanying condensed consolidated balance sheets.

Changes in the product warranty accrual for the three months ended June 30, 2011 and 2010 were as follows:

	Balance at April 1		Warranty Expenditures			Provision for (Benefit From) Estimated Warranty Cost			Balance at June 30
Fiscal 2011	$	177	$	(366	)	$	740		$	551
Fiscal 2010	$	609	$	(198	)	$	(62	)	$	349

Changes in the product warranty accrual for the nine months ended June 30, 2011 and 2010 were as follows:

	Balance at October 1		Warranty Expenditures			Provision for Estimated Warranty Cost		Balance at June 30
Fiscal 2011	$	463	$	(790	)	$	878	$	551
Fiscal 2010	$	541	$	(1,647	)	$	1,455	$	349

Derivative Financial Instruments

The Company's derivative financial instruments are designated to economically hedge the exposure of future cash flows denominated in non-U.S. dollar currency. Derivative financial instruments are measured at fair value and recorded in the condensed consolidated balance sheets as either assets or liabilities. Changes in the fair value of the derivative financial instruments are recorded each period in the condensed consolidated statements of operations or other comprehensive income, depending on whether the derivative instruments are designated as part of the hedge transaction, and if so, the type of hedge transaction.

The Company evaluates its derivative financial instruments as either cash flow hedges (forecasted transactions), fair value hedges (changes in fair value related to recognized assets or liabilities) or derivative financial instruments that do not qualify for hedge accounting. To qualify for hedge accounting, a derivative financial instrument must be highly effective in mitigating the designated risk of the hedged item. For derivative financial instruments that do not qualify for hedge accounting, changes in the fair value are reported in current period earnings.

The Company designates its derivative financial instruments as non-hedge derivatives and records its foreign currency forward contracts as either assets or liabilities in the condensed consolidated balance sheets. Changes in the fair value of the derivative financial instruments that arise due to fluctuations in the forward exchange rates are recognized in earnings each period as other income (expense), net in the condensed consolidated statements of operations. Realized gains (losses) will be recognized at maturity as other income (expense), net in the condensed consolidated statements of operations. The cash flows from derivative financial instruments are classified as cash flows from operating activities in the condensed consolidated cash flows statements. The Company recognized unrealized losses of $50 during the three and nine months ended June 30, 2011 and $0 during the three and nine months ended June 30, 2010, respectively, related to outstanding derivative financial instruments. See Note 9 for further information on derivative financial instruments.

Net Income Per Share—Basic and Diluted

Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding. In computing diluted earnings per share, the weighted average number of shares outstanding is adjusted to reflect the effect of potentially dilutive securities. The impact of potentially dilutive securities is determined using the treasury stock method.

The following table presents a reconciliation of basic and diluted shares:

	Three Months Ended June 30,				Nine Months Ended June 30,
	2011		2010		2011		2010
Basic weighted-average number of common shares outstanding		24,092,048		25,417,674		24,004,063		25,379,381
Dilutive effect of potential common shares		239,683		345,188		321,004		415,187
Diluted weighted-average number of common and potential common shares outstanding		24,331,731		25,762,862		24,325,067		25,794,568
Potential common shares excluded from the per share computations as the effect of their inclusion would be anti-dilutive		301,476		174,400		280,817		148,293

Commitments and Contingencies

Litigation

The Company is involved in litigation from time to time in the ordinary course of business. Management does not believe the outcome of any currently pending matters will have a material adverse effect on the Company's financial position, results of operations or cash flows.

Other Commitments

As of June 30, 2011 and September 30, 2010, the Company had outstanding purchase and other commitments, primarily related to capital projects at its various facilities, which totaled $35,176 and $38,054, respectively.

Pursuant to the laws applicable to the Peoples' Republic of China's Foreign Investment Enterprises, the Company's two wholly owned subsidiaries in China, MFC and MFLEX Chengdu, are restricted from paying cash dividends on 10% of after-tax profit, subject to certain cumulative limits. These restrictions on net income as of June 30, 2011 and September 30, 2010 were $15,962 and $13,386, respectively.

Significant Concentrations

Net sales to the Company's largest Original Equipment Manufacturer ("OEM") customers, inclusive of net sales made to their designated sub-contractors, as a percentage of total sales, are presented below:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2011			2010			2011			2010
OEM C		54	%		46	%		41	%		47	%
OEM D		34	%		38	%		45	%		39	%

Net sales into the Company's largest sectors, as a percentage of total sales, are presented below:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2011			2010			2011			2010
Smartphones		72	%		64	%		85	%		63	%
Tablets		23	%		2	%		10	%		1	%
Consumer electronics		1	%		28	%		1	%		30	%

Beginning in the second fiscal quarter of 2011, the Company elected to disclose net sales information for the tablets sector separate from the consumer electronics sector. All of these sectors are subject to economic cycles and have experienced periods of slowdown in the past.

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Condensed Consolidated Balance Sheets (USD $) In Thousands	Jun. 30, 2011	Sep. 30, 2010
ASSETS
Cash and cash equivalents	$ 100,008	$ 99,875
Short-term investments		14,991
Accounts receivable, net of allowances of $4,028 and $2,354 at June 30, 2011 and September 30, 2010, respectively	135,458	149,469
Inventories	73,285	76,933
Deferred taxes	3,445	3,445
Income taxes receivable	4,548	4,548
Assets held for sale	2,689	2,958
Other current assets	1,991	2,761
Total current assets	321,424	354,980
Property, plant and equipment, net	212,322	185,282
Land use rights	6,595	3,461
Deferred taxes	5,708	5,505
Goodwill	7,537	7,537
Other assets	11,955	5,556
Total assets	565,541	562,321
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	116,842	156,910
Accrued liabilities	23,981	27,077
Income taxes payable	1,302	4,972
Total current liabilities	142,125	188,959
Other liabilities	15,348	11,830
Total liabilities	157,473	200,789
Commitments and contingencies (Note 2)
Stockholders' equity
Preferred stock, $0.0001 par value, 5,000,000 and 5,000,000 shares authorized at June 30, 2011 and September 30, 2010, respectively; 0 and 0 shares issued and outstanding at June 30, 2011 and September 30, 2010, respectively
Common stock, $0.0001 par value; 100,000,000 and 100,000,000 shares authorized at June 30, 2011 and September 30, 2010, respectively; 24,096,571 and 23,916,665 shares issued and outstanding at June 30, 2011 and September 30, 2010, respectively	2	2
Additional paid-in capital	87,165	85,150
Retained earnings	286,325	250,829
Accumulated other comprehensive income	34,576	25,551
Total stockholders' equity	408,068	361,532
Total liabilities and stockholders' equity	$ 565,541	$ 562,321